Business Environment Of KFC
KFC (abb. Kentucky Fried Chicken) is among one of the most famous names around the world. This 91 years old world-famous fast-food restaurant chain was founded by Colonel Harland Sanders in 20th March 1930, currently operating in 150 countries and 24,104 locations. With good cooking skills Sanders also had a good business mind. He started franchising his business in 1952, and when he sold KFC to John Y Brown Jr and Jack C Massey for two million US dollars in 1964, it had 600 restaurants all over the world. Ownership of KFC then shifted a few hands and currently it is owned by Yum! Brand Inc, a company which also owns Pizza Hut, Taco Bell, The Habit Burger Grill
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In the 1930's when Colonel Sanders opened KFC, fried chicken wasn't popular at all. He himself actually made it famous. Sander noticed that frying chickens could take up to 30-40 minute. At that time hand burgers were the most popular items in the US and it takes only a few minutes to prepare one. To compete with burger Sanders needed to find a better way and so he did. He invented a new way of frying chickens using pressure cookers . Plus, point of this technique is that it captures all the juices and moisture into the chicken and makes it even more tasty. Still now KFC is maintaining Sander’s 11 herb and spices recipe and cooking technique in all branches.
Porter’s Five Force, SWOT and PESTEL analysis will help to understand KFC’s Business Environment from both internal and external areas.
PORTER'S FIVE FORCES ANALYSIS For KFC
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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 discusses 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
Figure 01: Porter’s Five Forces Analysis
Entry: 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 new entry will be hard. (Djankov, S., 2019)
Figure 02: Number of KFC restaurants (Statista, 2021)
With the help of social media food vlogging has become quite a big thing. People now are aware of different types of foods 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 also becoming more innovative and complicative 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.
Fiscal year April-March. | 2021 | 2020 | 2019 | 2018 | 2017 |
Sales/Revenue(In Million Dollars) | 27,798 | 28,459 | 24,674 | 25,716 | 23,498 |
Cost of Goods Sold (COGS) incl. D&A | 19,842 | 20,631 | 17,768 | 18,148 | 16,126 |
Figure 03: KFC’s Revenue in last 5 year (DRM, 2021)
KFCs is one of the most popular fast food restaurant chains in the world. In the last decade KFC Expanded its business in 10,000 (+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.
Bargaining Power of Buyer and Supplier: 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 better positions. (Craig, Tom, and David Campbell, 2015)
KFC sells their products to millions of people. Their business and branding are for the mass population. So, KFC will not adjust their business for any certain group or individual. If a buyer has to buy any products from KFC, he will have to buy it as KFC sells. 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 (Needle, D. and Burns, 2010). Same thing goes for KFC. KFC needs a huge amount of ingredients and there are lots of suppliers in the market too. So, it’s pretty easy for them to shift their supplier, they can even get the products at a low cost. That’s why 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 (Benjamin Gomes-Casseres, 2016). KFC has a big competition in the industry, McDonalds, Subway are also giants in the Food And beverage industry. McDonalds has 39000 restaurants 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. 
Figure 04: Market Size of street food vendors in last 10 years in USA (Statista, 2021)
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. 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 (Rivage-Seul, P., 2021). Many of them are even going vegan. In 2014, USA 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.
PESTEL Analysis
Political, Economic, Social, Technological, Environmental and Legal in short PESTEL analysis is a macro environmental factor that helps an organization or a business to understand its position, growth and helps to make decisions. It covers a wide range of factors and analyzes a company’s or a business to the depth.
Political Factor: Political factor discusses political stability, government influence, tax rate, subsidiary, Economic policy, monitoring and more. KFC has a wide range of businesses around the world. Each country has their own politics and decision-making style. Political environment is also different around the world. For example, Europe and western countries have strict tax policies. The monitoring system is very sophisticated. On the other hand, in Bangladesh and other Asian countries Monitoring policy is not up to the mark. This makes an impact in the service providing style in a business. It leads to downward product quality which is becoming a major issue for KFC and other food chains around the world.
In Europe and America many NGOs also play a vital role in a business. People are getting more health conscious; they are changing their food habits. These NGOs campaign and influence people about what they eat and to avoid high calorie foods. KFC was renamed from Kentucky Fried Chicken to avoid the term Fried Chicken from its name.
Economical factor: economical factor is the most important among all other factors that helps to analyze a business. In a simplest way, good economic conditions help the business to grow and expand. On the other hand, a bad economy doesn't. For a huge business-like KFC, slightest change in the world’s economy may have a huge impact. In the last 15 years the world has seen two big downfalls in the world's economy, 2008-2009 recession and 2020-21’s Corona pandemic. Many giant companies and businesses record losses in 2020-2021 along with KFC and it's Yum! Brand. China and the USA are the biggest markets for KFC. A small change in these two countries economy also affect KFC’s turnover. (Jones, P., Herbert 2019)
Social factor: Social ethics and culture can influence a business on how they run it. Example of this is KFC India. They adjust their menu and include vegan options because 20 to 30% people of India are vegetarian. In the Muslim countries and culture restaurants have to make sure that the food is Halal. All the ingredients have to be permissible and prepared in a certain way. On the other hand, Communist countries have strict rules to follow. So KFC has changed their business ideology to adjust with the society in different countries. And that's why KFC in India, Middle East, Europe and America are slightly different from each other.
Technological factor: In the last few decades Technology has changed at an unimaginable rate. It helped the food and beverage industry quite a lot. With the help of technology more work can be done with less manpower and time. So, maintaining the quality has become easier. KFC adopted the technological advantage pretty well. Automatic order machines, ATM, online delivery, Cooking Technology, Freezing Technology is helping KFCs restaurant all around the world. These machines are easy to use and don't need a salary. That’s how KFC is also saving costs by using the technology.
Environmental And Legal Factors: Current world has become very concerned about the environment. The Global Warming Effect is now clear in our environment. World leaders are trying to reduce carbon emission and other things that are harmful for our nature. Big business always contributes to nature in a large way. KFC uses many products and ingredients that come directly from nature and produce CO2 and other harmful elements to nature. For this many social and environmental organizations are accusing the company. KFC, on the other hand trying to cope with the situation to solve this matter. (Sen, A., 2017)
Larger companies often fail to control all of its areas. Maintaining the top quality in all of the 24,000 restaurants is not an easy task. Yum! Records hundreds of complaints every year. Some of them even end up with legal procedures. In 2005 a KFC restaurant in the US was fined 24000 USD for serving unhygienic food. However, KFC handles these issues pretty well unless they wouldn't be able to expand their business so rapidly.
SWOT Analysis of KFC
Strengths, Weaknesses, Opportunities, and Threats in short swot analysis helps an organization to understand its internal and external environment along with current and future position. Companies and organizations can make future plans and decisions from swot data.
Strengths | Weaknesses |
| Social Media plays a huge role in the current marketing industry. When the whole world is focusing on private marketing via social media, KFC hasn't done anything significant on this medium. So, from the upcoming new generations, the hype for KFC may go downwards.
Fitness awareness is increasing day by day. People are avoiding high calorie food more than ever. In the US, the vegan population increased 600% in the last 8 years [from 4 million to 20 million]. It may affect KFC’s sales in the future. (Elmer, P.J., Obarzanek, E., Vollmer, 2016)
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Recommendation
From the analysis it’s clear that KFC is doing really well, even in the pandemic they kept the loss to minimum. But in the fast-changing world one incident is enough to destroy. Here are some recommendations that should be helpful for KFC
Increase social media marketing
Introduce new items
Introduce vegan food items
More careful about hygiene
Introducing halal food
Behave more politely with the customers
Finding new market
Increase using environment friendly products
Utilize food waste
Increase using of green energy
Conclusion
KFC has been a well-managed and organized food chain serving good food since 1930. They expanded their business in a large number without compromising the quality. KFC has survived throughout the second world war, 2009’s recession and Covid pandemic. But with the new era and generation there are some threats and issues that should be dealt with creatively and carefully. There are lots of opportunities for KFC in the upcoming days, utilizing the assets and brain KFC has potential to grow more.
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