Case Study of Pfizer, Inc. Animal Health

I. EXECUTIVE SUMMARY

The history of KFC came about due to a very innovative and driven man named Harland Sanders, the creator of KFC in 1952. In order for Harland Sanders to gain prospective franchisees he traveled across the United States to find the potential buyers. In the 1960’s KFC became the first fast food chain to go international. “Colonel Sanders” began to franchise and took over two hundred restaurants and home retail outlets across the US. In 1963, the number of KFC franchises rose from 200 to 300 franchises that created a profit of $500 million. In 1964 the Colonel sold the business to Jack Massey and John Brown Jr. for $2 million with a per year share salary of $40,000 and as the times changed this salary later rose to $200,000. The Colonel still had a say in KFC’s public relations aspect of the company. In 1966, KFC was listed on the New York Stock Exchange and is still to this day found on the New York Stock exchange under the ticker symbol and branded company named YUM!. In 1969, KFC signed a joint venture with Japan, which helped in the expansion of KFC internationally. By 1971, KFC had 2,450 franchises and 600 company owned. KFC began operating in forty-eight countries and formed a merger with Heublein. Heublein did not have much experience in the restaurant business, so they left KFC manager’s in charge of restaurant management. In 1977, the opening of new KFC operations slowed down to twenty franchisees per year. In 1982, the new slogan “We do Chicken Right” came about. This slogan was created in an attempt to make KFC successful. New buildings were being created in order to show off KFC’s new image to lure customers and prospective buyers back into the Kentucky Fried Chicken Corporation. Along with the new slogan, RJ Reynold’s merged with Heublein. RJ Reynold’s was a larger industry that could help KFC’s success, but RJ Reynold’s quickly sold their portion of KFC to Pepsi Co. for $841 million, making them the leading market share in KFC, Pizza Hut, and Taco Bell, all of which will soon be known as Tricon. Now that Pepsi Co. became the primary owner of KFC in 1987, the company managers took over the responsibilities that KFC’s managers had in the past. In the early ‘90s, KFC expanded to Latin America while in 1993; it presented the Rotisserie Gold Chicken in attempts to gain more health conscience consumers. However, KFC customers were not fond of the new addition, and the rotisserie chicken was quickly removed. During the mid-1990’s, KFC established company-owned restaurants in Venezuela and Brazil. While in 1996, KFC’s and Pepsi Cola’s contract dispute was still unresolved. 4 Novak-CEO and KFC president ratified a new contract, that this problem was resolved. The new contract was able to give KFC a better competitive advantage with a sale of $4 billion dollars in chicken with the closest competitor being Boston Market with sales of over $3,900, holding 57.1% of the stock shares. While Boston Market trailed with $1,167 and only 17.1% of the stock shares, KFC was still ahead. In recent polls, KFC now controls 36.8% of the chicken restaurants while Boston Market dropped to 4.9%. Chick-fil-a has now gained an upper hand and operates 13% of the market. In 1997, Pepsi Co. and Tricon became subsidiaries of KFC. Today, KFC has 13,700 franchises outlets in 100 countries with the closest competitors being Chick-fil-a and Popeye's Chicken. The current president of KFC is Gregg Dedrick. The figure below gives a quick overview of the current events through a SWOT analysis, which depicts the environment that KFC finds itself currently. The SWOT analysis is an example of the different strengths, weaknesses, opportunities, and threats in which the company is facing or may face.
II. SWOT ANALYSIS
STRENGTHS
✓ KFC has continued to dominate the dinner and take out segment of the Industry. ✓ Strong trademarks recipes. ✓ KFC continued to dominate the Chicken Segment, with sales of 4.4 billion in 1999. ✓ Despite gain by Boston Market and Chick-fill A, KFC customer base remained loyal to the KFC brand because of its unique taste. ✓ Generate $1B each year ✓ Ranks highest among all chicken restaurant chains for its convenience and menu variety.
WEAKNESSES
➢ Failed to rank in top 20 in growth in 2000. ➢ Lack of knowledge about their customers. ➢ Question of over franchising leads to loss of control and quality. ➢ Lack of focus on R&D. KFC was loosing market share as other Chicken chain increased sales at a faster rate. ➢ KFC share of Chicken Segment sales fell from 71 percent 1989 , to less than 56 percent in 1999 , a 10 -years drop of 15 percent. ➢ KFC leadership in U.S market was so extensive that it had fewer opportunities to expand its U.S restaurant base, which was only growing at about 1 percent per year.
OPPORTUNITIES
✓ Church’s broadened its menu to include buffalo chicken wings, macaroni and cheese, beans and rice and collard greens. ✓ Baby boomers aged 35 to 50 constituted the largest customer group for fast-food restaurants. ✓ McDonald’s accounted for 35 percent of the Sandwich Segment while Burger King ran a distant Second, with a 16 percent market share. ✓ Per store sale at Burger King remained flat and Hardee’s per store sale declined by 10 percent. ✓ In family Segment, Friend’s and Shoney’s were forced to shut down restaurants because of declining profits. ✓ Within the Pizza Segment, Pizza Hat and Little Caesars Closed underperforming restaurants. ✓ Boston Market was a new restaurant chain that emphasized roasted rather than fried chicken.
THREATS
➢ McDonald’s with sales of more than 19 billion in 1999, accounted for 15 percent of the sales of the nation’s top 100 restaurant chains. ➢ McDonald’s generated per store sale 1.5 million per year. ➢ Much of the growth in dinner houses came from new unit construction in suburban market and small town. ➢ In Family Segment, Steak n Shake and Cracker Barrel expend its restaurant by more than 10 percent. ➢ KFC nearest competitor Popeye, ran a distant second with sales of 1.0 billion. ➢ In early 1990s ’ many industry analysts predict that Boston Market would challenge KFC for market leadership. ➢ Boston market and Chick-fil-A market share gains were achieved primarily by taking customer away from KFC. ➢ Popeye’s replaced Boston market as the second largest chicken chain in 1999.

III. PROBLEMS ➢ How will KFC increase market share in other regions of South America beside Mexico & Carabian even if financial constraints restricted KFC from doing so? ➢ How will KFC focus on strengthening its position not only in Mexico & Carabian?

IV. RECOMMENDATIONS ▪ Latin American markets is developing markets, so its growth is high and entry barriers are low. ▪ KFC could make strategic alliances with key suppliers to gain advantage over competitors in the market. ▪ An a peeling business model and good strategy has golden opportunity to shape the rules and establish itself as the recognize market leader. If KFC could increase company own restaurants, which enables it to control quality, services and restaurant cleanliness. Therefore more capital is needed. ▪ On the other hand if company operated franchise based restaurants throughout Latin America, its brand image could be build and its competitors will be loosing first more advantage.

V. CONCLUSION KFC should focus their strategies on the countries like China and India because they provide markets which have high growth rate.