To: David Novak, chairman, president and CEO Re: Strategic Growth Plan From: Date: April 18, 2012
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. 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
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