Kfc issues in india

KENTUCKY FRIED CHICKEN

CASE STUDY OF KFC:

ESTABLISHMENT OF A SUCCESSFUL GLOBAL BUSINESS MODEL

By the mid 1950s, fast food franchising was still in its infancy when Harland Sanders

began his cross-country travels to market “Colonel Sanders’ Recipe Kentucky Fried Chicken.”

He had developed a secret chicken recipe with eleven herbs and spices. By 1963, the number

of KFC franchises has crossed 300. Colonel Sanders, at 74 years of age, was tired of running the

daily operations and sold the business in 1964 to two Louisville businessmen—Jack Massey and

John Young Brown, Jr.—for $2 million. Brown, who later became the governor of Kentucky,

was named president, and Massey was named chairman. Colonel Sanders stayed in a public

relations capacity.

In 1966, Massey and Brown made KFC public, and the company was enlisted on the New

York Stock Exchange. During the late 1960s, Massey and Brown turned their attention to

international markets and signed a joint venture with Mitsuoishi Shoji Kaisha Ltd. In Japan.

Subsidiaries were also established in Great Britain, Hong Kong, South Africa, Australia, New

Zealand, and Mexico in the late 1970s. Brown’s desire to seek a political career led him to seek

a buyer for KFC. Soon after, KFC merged with Heublein, Inc., a producer of alcoholic beverages

with little restaurant experience and conflicts quickly arose between the Heublein management

and Colonel Sanders, who was quite concerned about the quality control issues in restaurant

cleanliness. In 1977, Heublein sent in a new management team to redirect KFC’s strategy. New

unit construction was discontinued until existing restaurants could be upgraded and operating

problems eliminated. The overhaul emphasized cleanliness, service, profitability, and product

consistency. By 1982, KFC was again aggressively building new restaurant units.

In October 1986, KFC was sold to PepsiCo. PepsiCo had acquired Frito-Lay in 1965, Pizza

Hut in 1977 with its 300 units, and Taco Bell in 1978. PepsiCo created one of the largest

consumer companies in the United States. Marketing fast food complemented PepsiCo’s

consumer product orientation and followed much the same pattern as marketing soft drinks

and snack foods. Pepsi soft drinks and fast food products could be marketed together in the

same restaurants and through coordinated national advertising.

The Kentucky Fried Chicken acquisition gave PepsiCo the leading market share in three

of the four largest and fastest growing segments in the U.S., quick-service industry. By the end

of 1995, Pizza Hut held 28% of the $18.5 billion, U.S. pizza segment. Taco Bell held 75% of &5.7

billion Mexican food segment, and KFC held 49% of the $7.7 billion U.S. chicken fast food

segment.

Japan, Australia, and the United Kingdom accounted for the greatest share of the KFC’s

international expansion during the 1970s and 1980s. During the 1990s, other markets became

attractive. China with a population of over 1 billion, Europe and Latin America offered

expansion opportunities. By 1996, KFC had established 158 company-owned restaurants and

franchises in Mexico. In addition to Mexico, KFC was operating 220 restaurants in the

Caribbean, and in Central and South America.

Many cultures have strong culinary traditions and have not been easy to penetrate. KFC

previously failed in German markets because Germans were not accustomed to take-out food

or to ordering food over the counter. KFC has been more successful in the Asian markets,

where chicken is a staple dish. Apart from the cultural factors, international business carries

risks not present in the U.S. market. Long distances between headquarters and foreign

franchises often make it difficult to control the quality of individual franchises.

In some countries of the world, such as, Malaysia, Indonesia, and some others, it is

illegal to import poultry, a situation that has led to product shortages. Another challenge facing

KFC is to adapt to foreign cultures. The company has been most successful in foreign markets

when local people operate restaurants. The purpose is to think like a local, not like an

American company.