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1.0 INTRODUCTION
The following report has been prepared for KFC’s, for the purpose of providing a
recommendation that will improve its international presence while keeping its product
quality, high customer service and restaurant cleanliness. KFC’s is facing with difficult
international strategy over the next 20 years in order for them to sustain its leadership
position. Their group have analyzed the growth opportunities of the company in both
domestic and international markets, as well as KFC’s core competencies, resources, and
capabilities, what is the most appropriate strategy for the company in order for it to go
Restaurants market. It is by far the most popular restaurant chain in the Malaysia,
commanding a market share of over 35%. With about 409 KFC restaurants in Malaysia,
Recent product innovations, such as O.R. Chicken Chop, Cheezy BBQ Meltz,
Chick N Fingers, H&S X-tra, Zinger Maxx and the Fish Sandwich offer their customers a
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variety of alternatives to chicken-centric meals. At the same time, they have continued to
expand company traditional chicken range by introducing variants like the Colonel
Burger and X-meal for teens and young adults, as well as providing a range of value
promotions and combinations. KFC’s also is the first Western Quick Service Restaurant
in the world to set up restaurants run by hearing-and speech-impaired staff; and the first
to establish a children's club (the KFC Chicky Club) with membership topping 250,000.
KFC invests in a variety of related activities that support company core restaurant
support services; a stable source of quality chicken at very competitive prices; better cost
control; and the ability to supply the fast-expanding open poultry market, locally and
abroad. Their plants process poultry for restaurants throughout KFC, and focus on
Now under Yum! Brands, Inc.’s management, KFC primarily operates in two
different markets, which are the domestic and international markets. In 2000 KFC
Australia, China, and Mexico where they planned to develop a base growth and to give
more control to restaurant owners. The international markets, which include Europe and
Latin America, have lesser control since they are franchisees. Those international markets
appear to be quite appealing since of the size of its markets but the problem is certainly to
select the proper countries and to develop a strategy to enter the given market to make it
profitable for the company, which we analyzed in detail later in the report.
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2.1 Vision
2.2 Mission
2.3 Principle
The KFC principles are adapted from the Yum! Dynasty Model and are
known as the KFC Dynasty Model. KFC believes in the fundamental principles of
disclosure and transparency. This means not only following best practices but also
being open about the way they run their business. In everything do, they seek to
balance their economic and social goals, aligning as nearly as possible the varying
all their business dealings. Recent years have witnessed a shift in the Malaysian
economy towards domestic demand, which in the immediate to mid term will be
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Malaysia Plan.
KFC motive are to satisfy their customers every time they visit their restaurants
and to do it better than their competitors. Fast-food industry sales rose by 5.4% with more
than 800 000 restaurants in the US in 1999. On the other hand, full-service restaurants
grew by 7% during the same period. The trend has now been reversed since in the mid-
1990s, at that time the fast-food sector was surpassing the full-service sector, however
due to the maturation of the sector, rising family income among many Americans and
many other demographic factors that will be discussed in more detail in the next point.
Dinner houses are becoming more popular and we can see a trend for full-service
restaurants. Sales in the full-service sector increased by more than 13% during 1999,
surpassing by a large margin the 6% fast-food industry growth. This higher growth in that
Domestically, the chicken market seems saturated and is only growing at a rate of 1% in
the US. Companies in that sector have to look at other alternatives if they want to grow.
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The fast-food industry is expected to grow rapidly in the next two decades
internationally, which makes it really attractive for chains to invest in since the US
restaurants in other countries and could take advantage of that. They have a strong
position abroad and they are ready to take part of the big trend and be the first-mover.
They already had 50% of their restaurants outside of the Malaysia by 2000. They use a
franchising, restaurants are owned by local entrepreneurs that know their markets really
well, which take away the barriers as language, law, financial, etc. Franchising appears to
be an excellent strategy to open new units in small countries as well, which could only
support a few restaurants. Of the 5 595 units located outside the Malaysia; 69% were
Mexico since the NAFTA (North American Free Trade Agreement) came into effect in
1994 and eliminated tariffs and quotas on goods shipped between the three countries. It
appears to be an attractive market since it has about 103 million in population and its
proximity to the US, which increases control, reduces transportation costs, etc. Though
expanding in Mexico might seem a good idea at first, many factors should be taken into
consideration before investing. For instance, the instability of the Peso should be a big
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concern for most companies. Notice that the Peso has been depreciating at an average
annual rate of 23% since NAFTA went into effect. But for KFC, this is not really a
concern since they get products and sell within Mexico borders and avoid exchange rate
risks. KFC’s largest supplier of chicken is Tyson Foods, which has two operating plants
in Mexico. All already KFC’s franchises established in Mexico have been switched to
company-owned, which provides them with greater control over quality, service, and
franchises, which slows down the expansion but KFC wanted keep control over its
restaurants.
International fast-food market was a strategy that most big fast-food players have
looked at since the US started to mature and saturate. Many chains expanded into other
countries to take advantage of the potential growth opportunities. There seems that there
is still an untouched market outside of the US. For instance, McDonald’s operate 46
restaurants for every 1 million US residents and only 1 restaurant for 3 million outside
the US. McDonald’s is certainly the biggest competitor abroad operating 14 000 units. As
discussed, since KFC was an early mover in the 1950s, it has developed brand
recognition worldwide. KFC was really successful abroad especially in the Asian and
Latin American markets since chicken was a traditional dish in those countries. Even
though, going international seems appealing, it carries more risks and it also becomes
more difficult to keep a control over your operations. Furthermore, time, culture and
language differences are also not encountered when operating domestically but serious
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replacement, and layoffs. Conflicts between KFC and PepsiCo arisen due to
different corporate cultures and soon created a morale problem within KFC.
KFC’s employees no longer had job security and stability. They used to have a
strong loyalty under the Colonel’s management but those days seemed to be over.
The friendly, relaxed atmosphere were now gone. Turnover went up and loyalty
went down under the new management. PepsiCo was certainly intimidating a lot
of KFC employees with their high performance, high accountability and highly
driven culture. This poor relationship with KFC franchisees was certainly not
helping the company to develop its business and actions should be taken since
profitability is affected.
KFC should start by solving their internal issues such as management and
restaurant menu before thinking about expanding. They should work on the
work in. Certainly KFC must do not believe that by treating employees poorly, a
company can be successful. They also need to make sure that their restaurants
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offer a diversified menu, provide their customers with quality food, excellent
KFC should always listen to their customers and try to follow the new
competitors will satisfy them and will eventually outperform you as Boston did
with its grilled chicken. To ensure that all their products conform to Halal
requirements, apart from obtaining Halal Certificate for its operational premises,
contaminants. They also adhere to industry best practices to maintain the highest
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There are several demographic factors that companies like KFC have to
take into account while evaluating expanding to other countries since a lot of
them influence the demand of food eaten in restaurants. During the last two
decades, we have noticed a few changes; rising incomes, higher divorce rates, and
greater affluence among American households. More than 50% of women work
outside of the home, which shows an enormous increase that influence, the meals
eaten outside. Since more women work, it brings an extra income to the family
Another factor that contributed to the increase demand is that people had
less time to prepare their meals. A lot of fast-food chains noticed the trend, which
35 to 50 were the largest consumer group. Biggest concern is that people do not
want fried food anymore, they are more health oriented and KFC’s menu is still
offering a lot of fried items. They understood that by changing their names from
Kentucky Fried Chicken to KFC but they would need to change their menu as
well.
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They also need to keep an eye and be aware of new technology in order to
improve their productivity and be able to compete more efficiently because even
though they may have a competitive advantage now, they can be sure that they
make sure franchisee follow the rules. Company also comes up with new items
regularly and keeps an eye on possible mergers and acquisitions to find the new
opportunity. Besides that, they were always aware of new technology to stay
factory, restaurants, ingredients and processes before permitting them to use their
logo. All imported products are certified Halal by the source country local Islamic
food and nutrition certification body recognized by JAKIM. To further verify the
Halal status of their imported products, officials from QSR Brands Shariah
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6.1 PRICE
KFC are also really price sensitive, they find the value is worth the price.
They know that people more preferred to choose the price that they can able to
buy it. KFC try to suitable the price and all the level community can come to their
restaurant. KFC have been segmented the price followed by place because they
look based on level of income. For example, at Genting Highlands the price for
For the new product they put the price more cheaper because wants to
attract the customer to taste and evaluate the new product. It is important because
the price give the big effect to the company to maintain their customer loyalty.
Besides that, the customer will always remember the KFC’s product and existing
the brand image in their memory. KFC are use with a Dumping selling product in
a foreign country below its domestic price or actual cost. KFC also use a Gray
channels of distribution.
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6.2 PLACE
KFC have planned to abroad their market at Mexico as well they have
planned before this. Besides that, they have seems that there is still an untouched
market outside of the US and that’s why KFC trying to give more franchisee
rights for the company who has interested. They try to open as many new
with 39 new stores being opened during the year in Malaysia and nine in
Singapore.
In some places, people think that as long as KFC can give delicious fried chicken,
it does not matter what kind of chicken they are using. On the other hand, some
people think that the use of GM chicken will have great influence on the food
chain which is very crucial to the environmental health and nature development.
Take China as an example, the people there do not have very strong and clear idea
on GM food. There are not as many problems that have to be faced as in other
Distribution channel in KFC start with seller. Then sellers are produce
nations. After that are channels within foreign nation distributed are product to
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way for KFC to enter new markets. Delivery, drive-thru, carry-out, and
supermarket kiosks were up and running. Other outlets in testing were mall and
office-building snack shops, mobile trailer units, satellite units, and self-contained
move toward the twenty-first century, executives believed KFC had to change its
image. "We want to be the chicken store," Cranor stressed in a 1991 Nation's
Restaurant News. Cranor's goal was total concept transformation, moving KFC to
6.3 PRODUCT
The KFC’s market has covered around the world. So that, the product that
they produced must be suitable based on that country. For example, Indian
country did not eat beef, the other alternative they find product based on
vegetarian. KFC also try to expand their product by introduce the variety meal.
For example, in Malaysia recently KFC have produce ‘Nasi Lemak Twister’.
The Malaysian people synonymous breakfast ‘nasi lemak’ and KFC have
seen it as a way to attract people. They also launches new product such as
Colonel Rice combo, Alaskan Fish Burger, BlackPepper Chicken Chop, Chicken
Poppers, Half-Half Meltz, Variety Bucket with Fish Fingers, and new X-meal
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including Hot & Spicy Chicken Fingers and Premium Popcorn Bites as well as a
new products at a dizzying rate. KFC, in contrast, had difficulty in creating new
them out quickly through franchisee stores. Hot Wings, brought out in 1990, were
They need to stay close to their mission (provide customers with quality
food, excellent service and restaurant cleanliness) and make sure to know how to
achieve their long-term objectives. They also have to keep innovating and coming
up with new items regularly. Remember that even though, they come up with
similar products, customers are most likely going to try them. They also have to
follow the trend and go hand in hand with customers to satisfy their changing
needs, as we have previously discussed with the current healthier food trend. They
also want to keep an excellent image by treating employees fairly and keeping a
good control over franchises to make sure they follow the company’s procedures.
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Values they are enduring moral beliefs shared by members of a society and
contributing to its culture and beliefs of what is "good," "right," and appropriate in
toward change Societies that are resistant to change are usually less willing to
adopt new products or production processes Local attitudes toward foreign culture
market. It will also determine the marketing segment, like if the selling point has
to very verify. Different attitude will determine the ease of entering the market.
According to the above data, the demand and supply of the host country can be
known so what the related product decision can be made to match the demand of
the market.
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6.4 PROMOTION
They offer an excellent growth potential and many markets are still
untouched. Basically, KFC does not need to make the promotion all out because it
being familiar since the last decade. The most important is KFC just need to
maintain their strategy to make sure their product can be stay along. Besides that,
they try to effective brand building and marketing promotions. They also
make customer easiest. KFC have been introducing of credit card facilities at their
In 1966, for instance, the Kentucky Fried Chicken Advertising Co-Op was
established, giving franchisees ten votes and the company three when determining
Council. To update its down-home image and respond to growing concerns about
the health risks associated with fried foods, in February 1991 Kentucky Fried
New packaging still sported the classic red-and-white stripes, but this time
wider and on an angle, implying movement and rapid service. While the Colonel's
image was retained, packaging was in modern graphics and bolder colors. New
menu introductions were postponed, as KFC once again went back to the basics to
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tighten up store operations and modernize units. A new $20 million computer
system not only controlled fryer cooking times, it linked front counters with the
portion of the chicken market, KFC tried to catch up with the introduction of
Rotisserie Gold Chicken. The company's new CEO, David Novak, also decided to
counter McDonald's and Burger King's "value meals," KFC brought out the
potatoes, macaroni, Cole slaw, biscuits, and a chocolate chip cake for $14.99. In
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7.1 STRENGTH
KFC was an early mover in the 1950s; it has developed brand recognition
worldwide. KFC was really successful abroad especially in the Asian and Latin
American markets. They have a strong position abroad and they are ready to take
part of the big trend and be the first-mover. They use a multi-domestic strategy to
primarily its unique way to deliver chicken. Being able to offer price sensitive
customers the option to choose the type of food they purchase enables them to fell
like they have more control over the money they spend on food.
KFC’s also has a great expertise in opening restaurants abroad and could
take advantage of that while the international market offers growth. KFC also has
an excellent bargaining power, which allows them to get lower prices from their
suppliers. Further, given the size of their already established market, KFC can
realize economies of scale, and strengthen their low-cost advantage that would be
achieved. KFC was the world’s largest chicken restaurant chain and the third
largest fast-food chain in 2000. They had about 55% of the US chicken restaurant
market and they operated more than 10 800 restaurants in 85 countries. They were
one of the first chains to go international in the 1950s, which allowed them, by
being the first-mover, to build one the most recognizable brands around the globe.
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KFC has changed hands a couple of times since it started operating. The major
one was certainly when PepsiCo, Inc. acquired KFC, which, at that time, became
the largest consumer-product company in the US. PepsiCo believed that KFC
had a clear idea in mind and wanted to take advantage of the synergy that would
KFC is well positioned now with a high market share. It is able to offer a
low price due to the economies of scale that it processes, and at the same time
offer the good original taste. We will now look at the competitive advantage that
From the table, we notice that KFC has a few core competencies such as
its reputation that it has built throughout the years, its art of operating, its size and
capital and certainly its chicken taste. At first, someone might think that the taste
of its chicken might be easy to copy for competitors but it is a top-secret recipe
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that even KFC employees and suppliers do not exactly know. For years, Colonel
Harland Sanders carried the secret formula for his Kentucky Fried Chicken in his
The recipe is now locked away in a safe in Louisville, Ky. Only a handful
of people know that multi-million dollar recipe (and they have signed strict
even James Bond proud. One company blends a formulation that represents only
part of the recipe. Another spice company blends the remainder. A computer
7.2 WEAKNESS
Even with a large market share, KFC is losing of its leadership. Market
shares have been declining at a rate of 15% over the past 10 years. To response to
the demand, Boston provides roasted chicken instead of fried. Without a doubt, it
appears that their strategy is working and that Boston is stealing customers away
from KFC.
cultures and soon created a morale problem within KFC. KFC’s employees no
longer had job security and stability. This poor relationship with KFC franchisees
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was certainly not helping the company to develop its business and actions should
be taken since profitability is affected. They have a limited menu and have sticked
to their original recipe chicken that made their success since the beginning. We
remember that even though KFC was in the chicken industry, McDonalds came
up with the chicken sandwich months before KFC did. KFC then occurred high
cost in order to try to create awareness for its sandwich. Unfortunately, due to low
7.3 OPPORTUNITIES
Another interesting fact is that the Chicken segment is the fifth in terms of
sales in the fast-food industry and we note that they are fewer competitors
compared to the other segments. During the last two decades, we have noticed a
few changes; rising incomes, higher divorce rates, and greater affluence among
American households.
More than 50% of women work outside of the home, which shows an
enormous increase that influence, the meals eaten outside. Since more women
work, it brings an extra income to the family and can then afford to eat outside
more often. Another factor that contributed to the increase demand is that people
had less time to prepare their meals. They also started operating restaurant with 2
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chicken fast food industry is not attractive due to the maturity and saturation. The
among the players. Only below or average return can be obtained. However, as
we have seen international markets offer great opportunities for companies that
are ready to expand. They offer an excellent growth potential and many markets
are still untouched. We will now evaluate if KFC has the resources, capabilities
7.4 THREATS
PepsiCo has three distinct markets that they do business in, which are soft
drinks, snack foods, and the fast-food restaurants. Between 1990 and 1996, annual
sales grew by more than 10%, operating margins averaged 12% for Pepsi-Cola.
During the same period, margins at KFC fell from 8% to 4%. Rivalry in this
and on offering various products; most companies are competing to offer new
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8.0 CONCLUSION
economy continued to facilitate development and strengthen resilience. This protected the
country from the uncertainties arising from global imbalances and the recent market
volatility caused by the U.S. sub prime mortgage crisis, and enabled the nation to achieve
a GDP growth of 6.3%. Meanwhile, the private sector was encouraged to assume a
liberalized the Foreign Investment Committee guidelines, reduced corporate tax to 26%
from 2008, and launched five economic corridors across the country Singapore’s
economy also made good progress during the year, growing by 7.7%.
boom in high-end apartments building as well as new office cum retail projects and two
large entertainment resorts. KFC employs a rigorous set of Key Performance Indicators
(KPIs) to build a performance culture and to help them define and gauge the progress we
are making towards their organizational goals. Their KPIs are used to measure
achievement and also form the basis for recognizing, rewarding and promoting
employees. In this way, they enhance motivation and build momentum. One of their most
Pedoman.
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and provides a fully transparent interface for those in leadership positions, including all
their restaurant managers and the Chairman himself. As well as enhancing open
communication and giving everyone the chance to voice their ideas and concerns,
Pedoman reinforces their strong corporate culture and strengthens Group bonding
between all levels. In so doing, it gives a powerful new meaning to their principle of
“People First”.
These include the Iskandar Development Region (a large logistics and tourism
(involving Perlis, Kedah, Penang and the north of Perak), the East Coast Economic
Corridor, and the Sabah and Sarawak Development Corridors. In addition, the extension
of Visit Malaysia tourism-related activities to 2008 should continue to boost the local
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