KFC is one of the first fast food chains in the U. S. and also among the first to expand globally. The chicken chain operated in almost 63 countries worldwide with more than 3, 000 outlets both company owned and franchised. KFC underwent into a series of mergers and acquisition by several corporations the last of which is PepsiCo, Inc. The latter is one of the most admired companies in the U. S. Company history is also presented and the effects of such organizational changes and company restructuring are also discussed. The fast food and the restaurant industry in the U. S. and in other countries is also described.
The fast food industry is comprised of 6 segments: sandwich chains, pizza chains, family restaurants, dinner houses, chicken chains, and steak chains. A list of the leader companies in each segment is also presented. Despite the growth of the restaurant industry, there are several indications that the U. S. market is saturated. Competition is very stiff and lead to the mergers and consolidation in the industry. Demographic and societal trends also resulted toe change in demands for fast-food chains. KFC as a firm has evolved also in many ways.
Under the management of PepsiCo, Inc. , there has been organizational restructuring and PepsiCo’s top executives replaced KFC managers. On the other hand, the reorganization has also lead to the increase in efficiency and lowered operational expenses. Relationship between KFC and the franchisees were also affected. Marketing strategies were also changing directions. The increasing demand for healthier foods and the increase of mobility among consumers have made KFC respond with those demands. New menu offerings were introduced and distribution coverage were widened.
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This resulted to increase and growth of KFC in terms of sales, profits, and international markets coverage. Operations in Mexico are given emphasis in the case. A total of 129 outlets, 21 of which are franchise restaurants and the majority of which are company-owned reflects a very wide expansion over the country. The political and economic instability and the risk faced by KFC with the situation is one of the constraints sought in this analysis. The investment approach of KFC in Mexico without losing market share is the main problem identified.
Alternative recommendations were made and strategic implementations were formulated to support realism on the analysis of this case. II. Situation Analysis 1. ) The Environment In 1960s to 1970s restaurants are fast expanding in the United States. Kentucky Fried Chicken (KFC) is among those who were able to quickly respond to the trends. By 1980s, expansion went international and in 1993 KFC, was able to establish outlets 60 countries like Japan, Australia, United Kingdom, China, and Latin America. The intense expansion and marketing increased the demand for fast food in the U. S.
However, demographic and societal trends may affect these demands to some directions. The rise in single person households increases by 17 % in the U. S and is forecasted to increase further in the coming years. Also the disposable household income continues to increase. This increase is attributed to the participation of women in the labor force. The increasing number of workingwomen increases the demand of microwave oven in the US households by 70 percent. Foods that can be easily prepared in microwaves are booming. Birth rates are projected to increase and this may affect whether families may eat out or stay home.
The increasing pace of restaurant construction in 1960s to 1970s resulted to limitation of future growth in construction. There is an increase of cost of finding prime locations resulting to an increasing pressure to increase sales to cover initial investment costs. These also results to establish aggressive international expansion a month the top three fast food chains: McDonalds, KFC, and Pizza Hut. Among the 1992 World’s Largest Fast-Food Chains, only 1 non-US company appeared in the list. This could be attributed to the 25% share of US in foreign investments.
The scarcity of fast food chains outside US can be relatively accounted to the US consumer market size, acceptability of fast food concept among Americans, and culinary practices of other countries are hard to break down. Aside from cultural factors, international business carries a risk that includes quality control over franchises, service and support problems, relative transportation and resource cost, and communication and operational problems. The saturation of the US market and increasing knowledge in international markets make expanding more attractive to the fast food chains.
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