David Novak, chairman, president and CEO Re: Strategic Growth Plan From: Date: April 18, 2012 Executive Summary As a long-standing leader of fast food industry, KFC has gained a substantial global recognition and developed multinational operation in past decades. Although KFC has successfully entered Asian and African markets, the domestic operation has faced lots of challenges such as declining market share, industry competition and franchisees dissatisfaction and so on. President Novak would like to keep how the company is doing well now, which is to focus more on foreign market.
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The domestic franchisees are disappointed to KFC management team due to lots of restrictions, and neglect. Therefore, they are ending up with selling off the KFC units, and changing their careers. The issue of KFC Company is to either focus solely on the foreign markets, or focus both with restructure the domestic market. Two recommendations are need to take into steps to create values for the Company’s future development: expansion the foreign market and restructure the domestic market. Creating Value Through Expansion and Restructuring Strategic Area: Accounting-Categorize the Profits into Geographic Locations.
Opportunities to Create Value ? Complement and categorize the profits of new stores into different geographic locations. Challenges to Create Value ? Extra resources and relevant personnel are required to complete the financial statements. ? Related tax information and avoidance should be considered. ? The distinct culture and dietary habits may influence the implementation of the strategy. ? The food tastes and customers are not match.
The declining market share, franchisee and raising competition may reduce the numbers of customers. ? Innovation may also have risks. Merger and acquisition may involve a few risks. ? Economic, political and environmental issues may also influence the Company’s share price. ? The interests of shareholders and stakeholders may be conflict. BA 453: Business Strategy and Planning ? Decision Sciences-Location Logistics Classify the KFC stores and differentiate the food according to different territories such as North America, and Asia. ? More stores in developing and third-world countries are built first. ? Provide domestic customers new concept of fast food: convenient, healthy food with express delivery.
Finance- Merger and Acquisition Review all merger and acquisition opportunities. ? Pay attention to all aspects that could affect the share price of the Company. ? Satisfy not only shareholders’ interests, but also all stakeholders’. ? Utilize steady financial ? Management- Increase Employee Empowerment. Marketing-Customer Perception ? ? ? activities to secure the funding to support the expansion and restructuring. Divide management teams according to different geographic locations. Increase employee empowerment so that employees are encouraged to make contributions to the Company’s development.
Less restrictions on franchisees so that they could match with cultural features. Gain more brand recognition through overseas operation. Customized each store with local cultural values. Utilize various advertising Medias to attract customers’ attentions. Restructure the concept of fast food in domestic area to regain the domestic customer perception. Leadership is critical in each management team. More executives and staff are required, which may at odds with the President’s decision. The company has to comprise certain customs and cultural values.
Differentiation may result extra expense. The original management methods will raise more franchisees dissatisfaction. And if scandals happen, it will spread quickly and globally. Advertisement expense will increase; some may not worthy. Rivalries within the industry are important factors to consider. Opportunity and Challenge Overview Restructuring the domestic market will enable KFC to regain the market share, brand recognition and customer satisfaction. By doing so, KFC could develop and expand more rapidly, build stores on a lower cost, and finally become the real global fast food leader.
Moreover, with the restructuring of the local market, KFC could expand its businesses through diversification such as step into the beverages market, i. e. iced tea. KFC could also go beyond burgers and fried chicken to other pizza and spaghetti. However, some internal challenges need to be considered: competition from potential competitors and new entrants, and substitute food. Diversification also brings lots of barriers such as competitions from the existing fast food companies like McDonald. Expansion the foreign market will enable KFC to develop globally and receive higher global recognition and more customer perception.
Since KFC is the first company to enter into Africa, strong customer loyalty can be built. Furthermore, differentiation of the food will provide customers with different tastes in different places. However, the expansion faces lots of external challenges, such as political, economic, social and environmental factors. BA 453: Business Strategy and Planning Recommendations Based on the above analysis, we make the following recommendations for KFC to create values and develop globally. Recommendation #1: Restructuring the domestic market through innovation and diversification.
Benefits ? Regain the market share, brand recognition and customer satisfaction. ? Lower costs when building and expanding stores ? Diversification could increase customer perception. ? Good for the Company’s rapid growth Barriers ? Competition of new entrants, existing firms and potential competitors in the fast food industry ? Competition of substitute food ? Price has to be charged lower due to the competition; therefore, the profit margin will be reduced. ? The ideas of the franchisees may at odds with the President.
Recommendation #2: Further expansions into African, Asian and other countries that are ripe for explosive growth by merging and acquiring, and other strategies. Benefits ? Explosive growth and large customer base in some countries which will bring huge profits.
Differentiation will increase customer perception and customer loyalty. ? The labor and production costs will be lower in some countries like China and Ghana Barriers ? Political factors: terrorists, policies regarding overseas operations. ? Economic: economic condition, currency exchange. Social: customs, eating habits, and demographics ? Environmental: corporate social responsibilities, pollution law Action Steps Action Steps 1. Introduce the restructuring solution through a comprehensive strategic business plan. 2. With management’s approval, refine the strategic plan with financials and complement the usage of resources.
