KFC Macro Environment Analysis

Principal of Management POM 17 Student: Thuy LE Minh Student number: 31926529 Lecturer: Mr Dipan K Mehta Program manager:Ms Hazel Ong I. Introduction II. SWOT analysis III. Macro- environment analysis IV. Competitive environment analysis V. Application about planning, organizing, leading and controlling VI. Conclusion VII. Recommendations VIII. References I . Introduction There are many fast food companies around the world. KFC is one of the most famous brands in the global fast food industry. KFC stands for Kentucky Fried Chicken that was founded by Colonel Harland Sanders in 1955 with only $105 (â€Å"Colonel Sanders & Kentucky Fried Chicken†, n. d. ). At the beginning, KFC specialized in Original Recipe fried chicken that known as Colonel’s secret recipe. It blends of 11 herbs and spices and completes by using the basic cooking technique. Similar essay: KFC Training and DevelopmentToday, KFC expands their products variedly to serve customer like â€Å"Kentucky Grilled Chicken†, â€Å"Honey BBQ Wings† and â€Å"freshly made chicken sandwiches† (â€Å"About KFC†, n. d. ). Sales volume is an important factor to generate profit in each company. In 1971, more than 2. 7 billion pieces of chicken were sold by KFC; it marked up the sales of more than $2 billion (â€Å"Colonel Sanders & Kentucky Fried Chicken†, n. d. ). In 2008, KFC took 42 percent of the market share in the U. S. chicken quick service restaurant (â€Å"About KFC†, n. d. ). Every day, KFC restaurants prepare meals for 12 million customers in the world.Therefore, KFC’s products has been satisfied many customers around the world. Additionally, the growing number of KFC’s franchises is one of the evidences shows the development of the KFC Cooperation. In 1971, KFC Corporation contained more than 3500 worldwi de franchises compared with more than 600 KFC’s franchises in the U. S and Canada and opened the first oversea outlet in England in 1964 (â€Å"Colonel Sanders & Kentucky Fried Chicken†, n. d ). In 2002, KFC is acquired by Yum! Brands . Today, KFC owns more than 20,000 restaurants within 109 countries around the world (â€Å"About KFC†, n. . ). Started with only $105, KFC now can evaluate as a multi-billion dollars company. This report will clarify some strengths, weaknesses, opportunities and threats of KFC, as well as the external and internal environment, and give some recommendations to help KFC becomes more successful in market. I. SWOT Analysis i. Strengths: * Good reputation, well- trained staff. According to the article â€Å"Brand values / KFC Gold standard qualities guarantee chicken that is so good! â€Å"( n. d. ), KFC ranks the highest in the Singapore and the U. S. Quick Service Restaurant Industry.Additionally, KFC has many loyal customers due t o the fact, everyday KFC serves more than 12 million people. * Delicious and strong trademarks recipes. Until now, KFC is famous for the Original Recipe fried chicken, and impressive KFC slogan is â€Å"Finger Lickin' Good† * Worldwide- recognized brand and a remarkably consistent brand identity The image of Colonel was attracted both children and their parent (Liu, 2008, p. 69). Furthermore, Liu (2008) states that Colonel’s humorousness attracts children and their parents put their trust in Colonel’s products. Strong capital position Yum! Brands Inc. which earned $ 11 billion in 2008 are controlling KFC, (â€Å"About KFC†, n. d. ) * Following C. H. A. M. P. S system (Liu,2008, p. 65) C- Cleanliness H- Hospitality A- Accuracy M- Maintenance P- Product Quality S- Speed * Good advertising campaign Weekly one KFC commercial can attract nearly 185 million people to see (â€Å"About KFC†, n. d. ). * Convenient locations, it is easy to access to KFC†™s restaurants. ii. Weaknesses: * Products tend to be close substitutes in the market. * In the past, KFC did use the oils contain Trans fats. Fonda, 2006) * Too many stores can lead to poor quality services ( Tice , 2010) * Unhealthy and fattening food (Cain, 2009) * Lack of providing food’s information ( KFC Singapore did not mention sugar or salt level ) (Macmullan, 2009, p. 31) iii. Opportunities: * Trend towards fast-food because it is delicious, quick and cheap ( Schlosser, 2001) * Consumers are curious about Western foods. (Liu,2008) * Chinese market is considered as the world’s fastest growing economy, KFC can choose this potential market to invest more restaurants. â€Å"Hailing China as World’s Fastest Growing Economy, Secretary-General Urges Chinese Government to Put Greater Emphasis on Social Equity, Environmental Sustainability†, 2010) * The increasing in number of young generation is tremendous. iv. Threats * Risk of new entrants due to lo w entry barrier (Luo, 2000) * Liu (2008) points out that avian flu reduced dramatically number of sale in fast food industry which always focus on chicken. * The growing trend of healthy food against fast food increase strongly. Davis (2002) states that eating fast food affects negatively to people’s health so people should say no to fast food.II. Macro- environment analysis i. Laws and Politics Singapore government controls over all companies and businesses. According to the article â€Å"Singapore Rankings†, 2012, intellectual property has the strongest security over Asian countries. Additionally, Singapore is the least dispassionate country in Asia. Corruption in Singapore’s economy is limited to minimum. In order to develop the economy, the government enacts many laws and regulations to â€Å"having the most open economy for international trade and investment â€Å"(â€Å"Singapore Rankings†, 2012).According to the article â€Å"Ease of doing busin ess in Singapore†, (n. d. ), starting a business need 3 days includes online registration with ACRA, company seal making, and work with Work Injury Compensation Insurance. Additionally, business opened in Singapore must follow â€Å"Companies Act†. ii. The Economy Singapore is considered as a top location for investment in the world, according to the article â€Å"Singapore Rankings†,2012. According to â€Å"Overview†, (2006), Singapore rated as â€Å"a solid macro economy in the world†, which is one of the most important factor in order to determine an economy.MAS- Monetary Authority of Singapore tries to keep inflation rates low, in order to keep value for the currency (â€Å"Singapore's exchange rate policy†, 2011, p. 15). CPI stands for The Consumer Price Index. In 2011, Singapore’s CPI was 5. 4% due to higher prices for accommodation, a significant increase in fuel and food (Huang, 2011). GDP is another measure of inflation, which stands for Gross Domestic Product was 5% growth in 2011. The Singapore’s economy can face with many difficulties due to the change in global economy. iii. TechnologyJohnson (1996) mentions that Singapore owns the best quality of the employees in Asian countries. They are literate and good at using computers. Thank for the development of IT in Singapore, KFC can be more easily generate their business here, for example, online marketing or online food ordering. In addition, telecommunications such as phones or mobile phones are developing rapidly in Singapore. Therefore, KFC can contact with their customers by phone or order food by using phone. v. Demographics According to the article â€Å"Population trends 2011† , (2011, p. 1), Singapore had 5. 8 million people at the end of 2011. It was 2. 5 times bigger than 2. 1 million people were at the end of 1970. Total population in Singapore includes both residents and non- residents. Between 2010 and 2011, total number of c itizens increased 0. 8%, and non – residents increased 6. 9 %. Therefore, people who went to Singapore to work or study were a significant factor contributed for Singapore’s population. According to the article â€Å"About KFC† (n. d. ), KFC focus on family and friends of all ages. However, between 2000and 2010 , there was slightly reduced in number of married people ( from 61. % down to 59. 4%) (â€Å"Population trends 2011†,2011,p. 1). It can affect negatively to KFC business. However, according to the article â€Å"Population trends 2011† , (2011, p. 7), the proportion of children who under 15 year sold took 20% up to 24% in 2011, these factor could positively affect to KFC business in Singapore. Due to the reason is that when a family goes out, their children will decide what places or restaurants to eat (Liu, 2008, p. 69). In Singapore, Chinese are the majority amongst other ethnic groups like: Malaysians, Indians and so on (â€Å"Population trends 2011†, 2011,p. 29).Additionally, KFC has a strong position in Chinese’s mind because of KFC considered as more â€Å"Chinese† performance than other brands (Liu, 2008, p. 70). So, KFC will face more advantages when expand their business in Singapore. On the other hand, Singapore has well- trained workforce as well as the best skilled labour in Asia, so it will provide good skilled employees for KFC . iv. Social Issue and the Natural Environment According to the article â€Å"Food and Beverage work group report†,(n. d. , p. 54), societal trend towards eating outside rather cooking and eating at home amongst Singaporeans.So, it creates more chance for Food and Beverage services expand its business. For instance, in 2008 there were 306 new fast food outlets were established compared with more 376 new outlets were opened in Singapore (â€Å"Economic Surveys Series†, 2011, p. 7). III Competitive environment analysis i. Competitors: KFC must compet e with many direct competitors in the global fast food industry. For example, Burger King, BBQ, Mc Donald’s, Wendy’s and so on. All of them are strong rivals based on their ability to gain market share, as well as their ambition to become the leader of the fast food industry.Additionally, fast food industry is saturated. Products are not easily differentiated. Almost of all fast food, restaurants currently lack of product differentiation. Their menu contains small types of foods such as hamburgers, chicken, french-fries. Therefore, some customers may feel difficult to eat these types of foods frequently. In order to compete with other strong rivals in the market, even it is difficult; KFC tried their best to distinguish their products. For example, pop corn chicken, egg tarts and so on.Based on lacking of product differentiation, as well as tremendous increase in competitors, fast food industry is control by Red Ocean Strategy recently. ii. New entrants: The threats of entry are quite high for fast food industry in general. Capital requirements are one of important factors, Jekanowski (1999, p. 15) shows that 2 main huge parts of company’s expense are cost of materials and employee’s salaries. In order to open some fast food outlets, company must consider some other factors such as rental cost, marketing, utilities and so on. iii. Substitutes and Complements:In consumers’ opinion, fast food attracts them because it is convenient, tasty, and cheap. However, nowadays, many research papers show the negative impact of eating fast food on health and encourage people to limit fast food consumption ( Schlosser, 2001) . KFC have to face with significant substitutes due to some companies who focus on healthier food but also low price strategy will adapt strongly to customer’s demand. iv. Customers: KFC aims to final customers. Schlosser (2000) states that nowadays, many women go to work, instead of cooking at home traditionally , fast food helps them to prepare meals for family.Furthermore, half of their food spending is for fast-food restaurants. Once again, the trend of eating outside amongst Singaporeans creates more chance for KFC expand their business especially in Singapore (â€Å"Food and Beverage work group report†, n. d. , p. 54). Additionally, a quarter of Americans select fast food for their meals every day ( Ransohoff, n. d. ). Therefore, KFC has many potential customers in order to satisfy those people and gets interest back. v. Suppliers: Bargaining power of suppliers is quite low due to some reasons. First, fast food industry especially KFC restaurants require common materials for producing.For example, chicken, breads, beef, potatoes and so on. Therefore, these materials are available and low cost of purchase. Secondly, there are many suppliers provide those stuff want to cooperate with KFC which means ability to raise prices can be limited. Table 1: Competitive environment analysis based on Porter’s Five Forces Porter’s Five Forces| Environmental Factor| Unattractive| Attractive| Competitors| x| | Threat of entry| x| | Substitutes| x| | Suppliers| | x|Customers| | x| V. Application about planning, organizing, leading and controlling i. Application about planning: One of KFC’s weaknesses is poor quality of service. Therefore, KFC may set their goals to increase customer satisfaction in 1 month. Then, KFC can achieve that goal by providing staff training workshops. They should know more about consumer behavior, and customer psychology in order to satisfy customer’s needs. These information can support by people who have good knowledge about customers. After these workshops, KFC should collect customer’s feedback whether staff perform better or not. ii.Application about organizing: KFC focus on satisfy customers to generate profits and improve its reputation. Each department includes in KFC have to respond its function to achiev e company’s goals. Departments such as marketing department, production department have their own leader like marketing manager, production manager, respectively. KFC must make sure that all of their department not only finish their tasks but also coordinate with other departments. Therefore, KFC need a good organizational structure to achieve its goals. For example, marketing managers need to plan a promotion campaign to introduce new products.They must cooperate with finance departments to determine the promotion budget. So, integration coordinates labor’s efficiency iii. Application about leading: KFC can choose relationship-motivated leadership style to control company. As a result, managers should build good relationships with employees, narrow the distance between managers and workers. Managers should care more about workers, satisfy their needs, and show company’s respectability toward employees. For example, managers can give more bonuses for workers in order to encourage them to finish their duty perfectly. iv. Application about controlling:KFC should follow clan control to achieve its targets. The managers should discuss with followers to make decision. For example, chiefs, cashiers and waiters who have more chances to communicate with customers can contribute many worthy ideas. Conclusion: This report mentions SWOT analysis, macro-environment analysis focus on Singapore, and competitive-environment analysis of KFC in Singapore then give some recommendations. KFC has good brand image in customers’ mind. However, KFC lacks of product differentiation amongst their strong competitors. The change in demographic can affect positively to fast food industry especially KFC.On the other hand, the trend towards healthy food can against the development of fast food. The macro environment focuses on five mains parts which are Law and politics, economy, technology, social issues and demographic. In Singapore, government open their laws and regulations to attract overseas investment. Moreover, the economy in Singapore is quite stable, with the development of technology help Singapore become a potential market for KFC. Moreover, Singaporeans prefer eating outside rather than cooking at home is one of the advantages for the development of KFC in Singapore.The competitive environment mentions five factors are competitors, threat of entrants, suppliers, customers, and substitutes. KFC has to face with many currently strong competitors, as well as new rivals. However, KFC lacks of its products differentiation. Some actions can help KFC in order to achieve good management through process of planning, organizing, leading and controlling. In conclusion, KFC is invited a really potential market especially in Singapore, they should develop their advantages as well as limit the disadvantages as much as possible to satisfy customers. Recommendation:In order to gain more customers satisfaction, KFC can do some renovations. Fir st, KFC should make differentiated products to compete with its rivals. For example, create new menu contains vegetarian food besides normal menu. Additionally, provides food in a variety of food sources like pork, lamb and so on. Secondly, KFC can give customer reward points for purchasing KFC’s products to get customer loyalty. Furthermore, birthday cards or small gift in customer’s birthday can build a better relationship. KFC can increase its sale volume and advertise its brand widely by running corporate discounts with its complements such as Pepsi, and Nestle.Last but not least, KFC need to care more about their customers by gathering customer’s information. Therefore, it is easier to collect their feedback as well as do customer loyalty program. All of these things above need a strong finance to support, however, its benefit definitely outweigh its cost. | ReferencesAbout KFC. (n. d. ). KFCfranchise. Retrieved March 9, 2012, from http://www. kfcfranchise. com/about-KFC-fried-chicken-business. phpBrand values / KFC Gold standard qualities guarantee chicken that is so good! . (n. d. ). KFC. Retrieved March 9, 2012, from http://kfc. com. g/about-us-goldstandard. phpCain, S. (2009, June 14). The worst restaurant of the year award goes to Kentucky Fried Chicken. The Health Wyze Report. 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