PORTER'S FIVE FORCES ANALYSIS of KFC
To understand facts and elements that can make an impact or affect a business Michael E. Porter introduced his five forces model in his book in 1979. This model was created in such a way so that any kind of organization or market can be analyzed. Data from these forces helps a business or an entrepreneur to expand the business or to know if it is safe to start a business or not. It also discuss the power of buyer and supplier and finds a way to negotiate. Porter's five forces of this model are
Threat Of Entry
Bargaining Power Of Buyer
Bargaining Power Of Supplier
Threat Of Substitute
Industry Rivalry
Threat of Entry for KFC
This force described whether it is hard or easy for a new business to enter in the market. If the market is really good for a certain business , evidently and inevitably new companies will arrive for that business. But there are some factors that affect the numbers of new entrants for any business. If the business is good, does not need much investment , has low competition, low risk, no govt regulation then it will be easy for new entrants and automatically attract new entrepreneurs and investors. If the factors are opposite then entrants will be hard.
With the help of social media food Blogging has become quite a big thing. People now are aware of all the differences of food around the world. They even can see how the food is prepared. It is making the people very selective about food. The food and beverage industry is also becoming more innovative and complicated every day. On the other hand Street food, food vans, food courts offer good food at a reasonable price. This type of food business doesn't require a big portion of investment. one viral video is enough for the marketing of this type of food vendor and can even dominate in the business. So it is pretty clear that the food business is not easy nowadays.
KFCs is one of the most popular fast food restaurant chains in the world. In the last decade KFC Expanded its business in 10000 (+67%) new locations. It had a positive growth in revenue over the past decade too. So the new entrants couldn't do any damage to KFC’s business. On the other hand KFC is still expanding its business. KFC’s huge loyal customers, brand value , and sales are so high that such threats couldn't do much to KFC.
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PORTER'S FIVE FORCES ANALYSIS of KFC |
Bargaining Power of Buyer And Supplier OF KFC
Strong bargaining power helps any entity to have a better position in a business. It leads to domination and demanding more for less products and services. Stronger the bargaining position, bigger the profit. And bigger brands have bigger positions.
KFC sells their products to millions of people. Their business and branding is for the mass population. So KFC will not adjust their business for any certain group or individual. So a buyer has to buy products from KFC according to their sales style and KFC can charge food items how much they want. That means the buyer doesn't have bargaining power with KFC.
On the other hand KFC is a huge brand. They need a big portion of raw ingredients every day. When a consumer buys a huge chunk of goods from a supplier and there are a number of suppliers available in the market, then automatically the consumer gets the bargaining power. Same thing goes for KFC. KFC has a huge market, they need a huge amount of ingredients and there are lots of suppliers in the market. So it’s pretty easy for them to shift their supplier, they can even get the products at a low cost. So KFC also is at the front of supplier bargaining power.
Industry Rivalry
Competition among business is always good for the market and Consumers. Consumers can get the best service and products if the market has a solid competition. But industry rivalry could easily take a business backward and give a bad nightmare. KFC has a big competition in the industry, McDonalds, Subway are also giants in the Food And beverage industry. McDonalds has 39000 restaurant around the world making it the biggest restaurant chain. Street food industry also got bigger in the last decade. Despite all this competition KFC’s growth is still going upward.
Threat of substitutes
KFC did well in four of the five Porter’s forces, but in Threat of substitutes KFC has some concerning issues. Threat of substitutes occurs when buyers have availability of similar products with low price tag and better quality. If the buyer is not satisfied with the product then they can easily switch to others.
Though KFC did well against its competitors, with the growing globalization, street food industry’s expansion, a buyer can easily change his or her taste and switch. Another thing is that people are now getting more conscious about their health. Big number of people are now trying to avoid High Calorie food to keep fit. Many of them are even going vegan. In 2014 the US had only 4 million vegans which is now 20 million by 2021. World’s Second largest population, India’s 20-30% people are Vegetarians . That’s why vegan restaurants are getting famous day by day. Which is a threat not only for KFC but also for all these types of restaurants.
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