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Kfc project of intrntnl business

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  • 1. PROJECT OFINTERNATIONAL BUSINESSSUBMITTED TO: SUBMITTED BY:MRS. SHELLY TANYA SHARMA B.B.A. L.L.B. V TRIMESTER.
  • 2. DECLARATIONI, TANYA SHARMA pursuing BBA LLB (honors) (5thtrimester) at Institute of Technology and Managementi.e. ITM University School of Law hereby declare that Ihave completed my project on KENTUCKY FRIEDCHICKHEN (KFC) ‘’ in the academic year of 2011-2012.The information submitted is true and in the best ofmy knowledge.SUBMITTED TO: SUBMITTED BY:MRS. SHELLY TANYA SHARMA B.B.A. L.L.B. 5TH TRIMESTER.
  • 3. ACKNOWLEDGMENTThis project report could not have been prepared,without the help and encouragement from variouspeople. Hence, for the same reason I would like to thankmy guide, mentor and of course my professor Mrs Shelly .It was from her support that I got proper guidelines forpreparing this project. There are many other people Iwould like to thank on the same line without which thisproject would have been nonsense over stilts and theones who made my project and the product work for me.All these information is collected from various sitesincluding the company’s site. Which is being the mosthelpful area from which I have gathered the informationand completed this project. I thank all for making myproject good enough.
  • 4. INTRODUCTIONKFC IndiaKFC is the world’s No.1 Chicken QSR and has industry leadingstature across many countries like UK, Australia, South Africa,China,USA, Malaysia and many more. KFC is the largest brandof Yum Restaurants, a company that owns other leading brandslike Pizza Hut, Taco Bell, A&W and Long John Silver.Renowned worldwide for it’s finger licking good food, KFCoffers its signature products in India too! KFC has introducedmany offerings for its growing customer base in India whilestaying rooted in the taste legacy of Colonel Harland Sander’ssecret recipe. Its signature dishes include the “crispy outside,juicy inside” Hot and Crispy Chicken, flavorful and juicyOriginal Recipe chicken, the spicy, juicy & crunchy ZingerBurger, Toasted Twister, Chicken Bucket and a host ofbeverages and desserts. For the vegetarians in India, KFC alsohas great tasting vegetarian offerings that include the VegZinger and Veggie Snacker . In India, KFC is growing rapidlyand today has presence in 21 cities with close to 107 restaurants.
  • 5. HISTORY AND BACKGROUNDKFC HistoryWay back in 1930’s Colonel Harland Sanders got somedistinguished Kentucky folks lickin’ their fingers. It’sbeen in fashion since then!Colonel Harland Sanders, founder of the originalKentucky Fried Chicken, was born on September 9,1890.When he was six, his father died and his mother wasforced to go to work while young Sanders took care of histhree year old sibling. This meant he had to do much ofthe family cooking. By the time he was seven, HarlandSanders was a master of a range of regional dishes.After a series of jobs, in the mid 1930s at the age of forty,Colonel Sanders bought a service station, motel and cafeat Corbin, a town in Kentucky about 25 miles from theTennessee border. It is here that Sanders beganexperimenting with different seasonings to flavor hischicken which travelers loved and for which he soonbecame famous.During the next nine years he developed his secret recipeof 11 herbs and spices and the basic cooking techniquewhich is still used today. Sanders fame grew. He sold hischicken on the highway! But when the highway wasremoved, he sold up and traveled the United States by car,cooking chicken for restaurant owners and theiremployees. If the reaction was favorable Sanders entered
  • 6. into a handshake agreement on a deal which stipulated apayment to him of a nickel for each chicken the restaurantsold.By 1964, from that humble beginning, Colonel HarlandSanders had 600 franchise outlets for his chicken acrossthe United States and Canada. Later that year, ColonelSanders sold his interest in the United States operationsfor $2 million. The 65-year-old gentleman had started aworldwide empire using his $105 social security cheque.Sadly, Colonel Harland Sanders passed away onDecember 16th, 1980 aged 90.His legacy lives on with KFC restaurants all over theworld. KFC now stretches worldwide with more than13,000 restaurants in more than 80 countries andterritories around the world serving up the Colonel’sOriginal Recipe. It is a $13 billion brand based out ofKentucky and is the leading QSR around the world whichis based in Louisville, Kentucky. Yum! Brands own 5brands, out of which KFC is the largest brand within theYum! Portfolio, founded by Colonel Harland Sanders inthe year 1938.
  • 7. PROBLEMS FACED IN GLOBALWORLDIn the latest salvo against fast-food chains, KFC is beingsued for frying its chicken in cooking oils that containtrans fats, which can contribute to heart disease anddiabetes. Heres the skinny on the fat fight:Why doesnt KFC use a healthier oil? Like most fast-foodchains, KFC cooks with partially hydrogenated vegetableoil, which doesnt turn rancid as quickly as healthier,nonhydrogenated oils. "Extra crispy" chicken may alsotaste better when fried in this oil. "The flavor is crunchier,and you dont get that feeling of fat coating your mouth,"says Ted Labuza, a food scientist at the University ofMinnesota. But the oil does have dangerous trans-fattyacids.Whats so bad about trans fat? It raises ones badcholesterol, which boosts the risk of coronary disease. Afederal dietary panel has recommended that peopleconsume no more than 2 g per day.Is KFCs food really that unhealthy? The company says itsproducts "meet or exceed all government regulations."But as the Center for Science in the Public Interest, theactivist group behind the lawsuit, points out, a three-piece
  • 8. extra-crispy combo meal contains as much as 15 g oftrans fat--more than a person should ingest in a week.What are other chains doing? Wendys plans to eliminatetrans fats from its food; the Cheesecake Factory is doingso already. McDonalds backpedaled on a promise to cuttrans fats and says its studying alternative oils, as isBurger King.
  • 9. PROBLEMS FACED BY KFC ININDIAThe case highlights the ethical issues involved inKentucky Fried Chickens (KFC) business operations inIndia. KFC entered India in 1995 and has been in midstof controversies since then. The regulatory authoritiesfound that KFCs chickens did not adhere to thePrevention of Food Adulteration Act, 1954. Chickenscontained nearly three times more monosodiumglutamate (popularly known as MSG, a flavorenhancing ingredient) as allowed by the Act. Since thelate 1990s, KFC faced severe protests by People forEthical Treatment of Animals (PETA), an animal rightsprotection organization. PETA accused KFC of crueltytowards chickens and released a video tape showing theill-treatment of birds in KFCs poultry farms. However,undeterred by the protests by PETA and other animalrights organizations, KFC planned amassive expansion program in India
  • 10. RE-ENTRY OF KFC INTO INDIANMARKETA case in point is KFC. KFC entered India in 1995, buta controversy surrounding the levels of MSG in itspreparations and subsequent protests from farmersgroups and animal rights activists spelt trouble for thecompany. Ultimately, the company had to shut all butone outlet in the country. Only recently in 2003 it madea quiet re-entry into the Indian market. Then came upwith the strategies and menu that is desirable by theIndian consumers. And since 2003 it is expandingsuccessfully its business in India.Mission statement“To be the leader in western style quick servicerestaurants through friendly service, goodqualit food and clean atmosphere ”
  • 11. Goals of KFCBuild an organization dedicated to excellence.Consistently deliver superior quality and value in ourproducts and services. Maintain a commitment toinnovation for continuous improvement and grow,striving always to be the leader in the market placechanges. Generate consistently superior financial returnsand benefits our owner and employees. To establish inIndia our position as leading WQSR (Western QuickService Restaurant) chain, serving good value. Innovativechicken-based products. Consistently, providing apleasant dining experience, with fast friendly, in a cleanand convinient locations. All the times we must dedicatedto providing excellent and delighting customers.
  • 12. OUTCOME OF CASE STUDY OF KFCIN RESPECT OF SRC(SELF REFERENCE CRITERION)KFC has not understood the significance of cultural,economic, regulatory and ecological issues whileestablishing business in a country like india.»KFC has not Appreciated the need for protectinganimal rights in developed and developing countrieslike India.» They have not understood the importance of ethics indoing business.»They have not examine the reasons for protests ofPETA.The case highlights the ethical issues involved inKentucky Fried Chickens (KFC) business operations inIndia. KFC entered India in 1995 and has been in midstof controversies since then. The regulatory authoritiesfound that KFCs chickens did not adhere to thePrevention of Food Adulteration Act, 1954. Chickenscontained nearly three times more monosodiumglutamate (popularly known as MSG, a flavorenhancing ingredient) as allowed by the Act. Since thelate 1990s, KFC faced severe protests by People forEthical Treatment of Animals (PETA), an animal rights
  • 13. protection organization. PETA accused KFC of crueltytowards chickens and released a video tape showing the ill-treatment of birds in KFCs poultry farms.
  • 14. STRENGHTS OF KFCStrengths can be found internally in a company and canbe used to the company’s advantage. The strengthsidentified are as follows:1. KFCs secret recipe.The secret recipe has long been a source of advertising,and allowed KFC to set itself apart. Also, KFC was thefirst chain to enter the fast-food industry, just beforeMcDonalds, which opened its first store a year later, andthe "secret recipe" was the initial home replacementstrategy.2. Name recognition and reputation.KFCs early entrance into the fast-food industry in 1954allowed KFC to develop strong brand name recognitionand a strong foothold in the industry. The Colonel isKFCs original owner and a very recognizable figure, bothin the U.S. and internationally, in their new logo. In fact,in the fourth annual LogoValue Survey, done by TheSchecter Group, the KFC logo was the only one whichsignificantly enhance the brands image (Logos add…1).
  • 15. 3. PepsiCos success with the management of fast foodchains. PepsiCo acquired Pizza Hut in 1977, and TacoBell in 1978. PepsiCo used many of the same promotionalstrategies that it has used to market soft drinks and snackfood. By the time PepsiCo bought KFC in 1986, thecompany already dominated two of the four largest andfastest-growing segments of the fast food industry(Wright, p.424-426).4. Traditional employee loyalty:"KFCs culture was built largely on Colonel Sanders laidback approach to management" (Wright, p.433). Beforethe acquisition of KFC by PepsiCo, employees at KFCenjoyed good benefits, a pension, and could receive helpwith other non-income needs. This kind of "personal"human resources management makes for a loyalworkforce (Wright, p.434).5. Improving operating efficiencies by reducing overheadand other operating costs can directly affect operatingprofit.Due to the strong competition in the US, the fast-foodchains are reluctant to raise prices to increase profit.Many of the chains are turning to operating efficiencies toincrease profit. For many companies, operatingefficiencies are achieved through improvements incustomer service, cleaner restaurants, faster and friendlierservice, and continued high-quality products.
  • 16. WEAKNESSWeaknesses are also found internally like strengths.Weaknesses, however, can limit a company’s potential.The weaknesses for KFC are identified as follows:1. The many sales of KFC lead to a confusing corporatedirection.Between 1971 and 1986, KFC was sold three times. Thefirst two sales, to Heublein, Inc and to R.J. Reynolds, leftthe company largely autonomous. It wasnt until the saleto PepsiCo in 1986 that changes in top managementstarted to take place. These changes happened almostimmediately after the sale.2. KFC has a long time to market with new products.Because of the nature of the chicken segment of the fastfood industry, innovation was never a primary strategy forKFC. However, during the late 1980s, other fast foodchains, such as McDonalds, began to offer chicken as amenu option. During this time, McDonalds had alreadyintroduced the McChicken while KFC was still testing itsown chicken sandwich. This delay significantly increasedthe cost of developing consumer awareness for the KFCsandwich.3. Conflicting cultures of KFC and Pepsi Co.
  • 17. While KFCs culture was largely based on the Colonelslaid back approach to management, while PepsiCosculture is more of a "fast track" attitude. Employees donot have the same level of job security that they enjoyedbefore the PepsiCo acquisition.4. Turnover in top management.PepsiCo bought KFC in 1986. By the summer of 1990PepsiCos own management had replaced all of the topKFC managers. However, by 1995 most of this newPepsiCo management had either left the company or beenmoved to a different division. In addition, Kyle Craig,who was named president of KFCs US operations in1990, left in 1994 to join Boston Market.5. Recent contractual disputes with franchisees in theUnited States.This is also an example of the conflicting cultures of KFCand PepsiCo. KFCs franchisees had been used to littleinterference from corporate offices. In 1989, the CEOannounced new contract changes - the first in thirteenyears. "The new contract gave PepsiCo managementgreater power to take over weak franchises, to relocaterestaurants, and to make changes in existing restaurants"(Wright, p.434). The franchisees protested these changesand the relationship between the corporate KFC and thefranchisees in the United States have been strained eversince this announcement.
  • 18. OPPORTUNITIES TO KFC New Markets: Globalisation has opened doors for new markets for the company. As the developed markets are mostly saturated, the developing countries like India and China promises a good market and generation of demand in the future. With more than 70% of the markets in india being unexplored and un organised, KFC has a good scope of expanding its operations in the country. Cross Culture: Generally there is a good acceptance of American culture of fast food in India. People are opening up to fast foods more regularly in their daily lives and not just keeping it a once in a month affair. Thus Indian mindset is fast changing. Large Youth population: India has a very large share of youth population a compared to other countries. More than 60% of the population is under the age of 30yrs. As the young generation are more open to fast foods and demand it more, this is a good news for the company. New variety: Company can also come up with new variety in the menu likePizzas, garlic breads to attract more customers.
  • 19. THREATS TO KFC Competition: Competitor companies like McDonalds are fast catching up with the market. McDonald’s with sales of more than 19 billion in 1999, accounted for 15 percent of the sales of the nation’s top 100 restaurant chains. Organizations like PETA People for Ethnic Treatment for Animals have given a bad name to the company which may prove disastrous to the image of the firm. Currently, KFC is under massive attacks from animal organizations, questioning the way KFC’s suppliers are threatening the chicken, before they got slaughtered. Anti-KFC campaigns, such as the one from PETA are affecting KFC’s brand image in a negative way and result in direct dollar losses, as less people are consuming KFC chicken.  Saturated US Market: Now KFC cannot rely on just its home market to generate sales. As the US markets are already saturated and leave no or little scope for growth, company necessarily needs to look at offshore foreign markets to generate sales and keep up the profits.
  • 20. PROBLEMSThrough an analysis of the strengths, weaknesses,opportunities, and threats of KFC, the following potentialproblem areas were identified:1. No defined target market.The advertising campaign of KFC does not specificallyappeal to any segment. It does not appear to have aconsistent long-term approach. The U.S. has enormouschanges in its demographics. Single-person householdshave increased from 12% in 1970 to 25% in 1995. Withthis kind of dramatic change, KFC does not have a properapproach to its target market.2. Saturation of the U.S. Market.There has been an increase in the overall number of fast-food chains. Access to restaurants is now easier due tonon-traditional locations, for example in airports and gasstations. Also, the age of Americans tends to change thefrequency of eating out.3. Health Conscious Consumers.There has been a trend toward an increasingly healthy dietin America. This put KFC at an extreme disadvantage dueto its fried product offering.4. Increased Start Up Costs.
  • 21. Prime locations have increased in cost due to limitedroom for expansion. New technology has increasedefficiencies, but resulted in greater increased start upcosts. Restaurant and equipment packages range from$500,000 to $1,000,000.
  • 22. ENVIRONMENTAL FACTORS ANDOPPORTUNITIESPoliticalThe operations of KFC are affected by the governmentpolicies on the regulations of fast food operation.Currently government are controlling the marketing offast food restaurant because of health concern such ascardiovascular and cholesterol issue and obesity amongthe young and children in the country. Governments alsocontrol the license given for open the fast food restaurantand other business regulation need to follow such as for afranchise business. Good relationship with government ingiving mutual benefits such as employment and tax is amust for the company to succeed in any foreign market.EconomicThough for last 1 year their was economic slowdown allacross the globe but the sales of KFC and other fast foodchains did not slow down to that extent that of othersectors in. The GDP (Purchasing Power Parity) isestimated at 2.965 trillion U.S. dollars in the year 2010.The GDP- per Capita (PPP) was 2700 U.S. dollars asestimated in 2008. The GDP- real growth rate in 2007
  • 23. was 8.7%. India has the third highest GDP in terms ofpurchasing power parity just ahead Japan and behind U.S.and China. Foreign direct investment rose in the fiscalyear ended March 31 2007 to about $16 billion from just$5.5 billion a year earlier. There is a continuous growth inper capita income; India’s per capita income is expectedto reach 1000 dollars by the end of 2007-08 from 797dollars in 2006-07. This will lead to higher buying powerin the Hands of the Indian consumers. So taking intoconsiderations the economic factors of India KFC is safe.The only danger to it will be if there is a terrorist attack inIndia and the victim is KFCSocio CulturalIndia is the second most populous nation in the worldwith an approximate population of over 1.1billion people.This population is divided in the following age structure:0-14 years – 31.8%, 15-64 years – 63.1% and 65 yearsand above – 5.1%. There has also been a continuousincrease in the consumption of fast food in India. Thesocial trend toward fast good consumption is changingand India has seen an increase of 90% fast foodconsumption from the year 2002- 2007. This increase isfar greater than the increase in the BRIC nations of Brazil(20 per cent), Russia (50 per cent) and China (almost 60
  • 24. per cent) Thus this shows a positive trend for fast foodindustries in India.TechnologicalThe Indian fast food Industry is heating up with a lot offoreign players entering the Indian market. Thetechnological knowhow and expertise will also enter theIndian market with an increase in competition. With thelower rates and increase technology the fast food countersare attracting youth by giving them attractive deals. Fore.g. KFC and Domino’s pizza. For a fast food restaurant,technology does not give a very high impact on thecompany and it is not a significant macro environmentvariables. However KFC should be looking to competitorsinnovation and improve itself in term of integratingtechnology in managing its operation. For example ininventory system, supply chain management system tomanage its supply, easy payment and ordering systems forits customers and wireless internet technology.Implementation of technology can make the managementmore effective and cost saving in the long term. This willalso make customer happy if cost savings results in pricereduction or promotional campaign discount which willbenefits them from time to time.
  • 25. EnvironmentalAs one of world largest consumer of beef, potatoes andchicken, KFC always had been critics for worldenvironmentalist. This is because high consumption ofbeef causing the green house effect by methane gassescoming from the cow’s ranch. Large-scale plantation haseffect the environment and lost of green forest openingfor plantation activities. Vegetarian environmentalistcriticizes the fast-food giant for cruelty to animals andslaughtering. In America, once KFC want to introducewhale burger causing uproar because whales areendangered species. Before using paper packaging, KFConce had been criticized for being insensitive to pollutionbecause of using ne based packaging for its food products.Imagine millions of people purchase from fast foodoperator and how is the impact to world environment bythrowing away those hard to recycle packaging.Our world is getting concern on environment issue andbusiness operating here should not just care for profit, butcareful usage of world resources for sustainabledevelopment and care for environment safety and healthfor our future generation. Critics and concern from allpublic or activist should be review and support ifnecessary to ensure we play our social responsibilitybetter.
  • 26. Legal factorsAs a certified fast food operator, there are manyregulations and procedures that KFC should follow. Forexample is the Halal certification that becomes a concernto Muslim consumers. KFC should protect its integrityand consumer confidence by ensuring all materials andprocess are as claimed or must followed. Other legalrequirement that the business owner should follow asstipulated in laws are such as operating hours, businessregistration, tax requirement, labor and employment lawsand quality & environment certification (such as ISO) inwhich the outlet has been certified. The legal requirementis important because the offenders will be fined or havetheir business prohibited from operating which can bedisastrous.