2. How would you describe KFC’s international strategy? Which cross-border synergies can KFC reap and how locally responsive is the company? KFC’s international composition provides an exemplary mix of international entry strategies. The company enters a foreign market either by a greenfield entry by establishing a company-owned foreign subsidiary (21 %) or by a joint venture (10 %) (figure 10.2 in the book). However, in most of the cases, KFC expands it global franchise-network (69 %). In Latin America, KFC illustrates this mix, too. The entries into Mexico and Puerto Rico, accessed firstly because of their geographical and social proximity to KFC’s home country, were established through company-owned subsidiaries, where small markets in the Caribbean were opened up by franchisees. The country differences in KFC’s distribution channels have effect on the way the company is able to reap cross-border synergies between it’s Latin American country units and its local responsiveness in each country. An interesting discussion point here would be why: in general, franchisees are less able to build on global synergies yet are more locally responsive, where more integrated company-owned subsidiaries provide more means for the corporate center to capture cross-border synergies yet could be less receptive to country-specific demands. This is illustrated by the case example of Pepsi interfering in KFC’s franchise operations in an attempt to capture more synergies, and the resistance of the franchisees that followed. First, the teacher can handle the synergies that KFC can capture by using the business model tool from Chapter 5. When handling this question, figure 10.5 (‘forms of cross-border synergies) can be used as a slide template. Cross-border synergies can be reaped by leveraging resources, integrating activities and aligning positions. The resources KFC can leverage are mainly intangible. Students could come up with the following examples:
Relationships: Connections and bargaining power with suppliers; especially with the soft drink manufacturer (which would probably be a global brand: PepsiCo); Knowledge: Marketing know-how, expertise in customer service, embedded food preparation techniques, advertising insights, supply and stocking management intelligence; Capabilities: Preparation skills, service abilities, purchasing capabilities, interior decorating competences; Attitude: The ‘Colonel Sanders home-cooked Kentucky Fried Chicken’ service and style-mindset. The following activities hold possibilities for cross-border integration: Operations: Packaging of food and drinks, sharing of other materials (napkins, ketchup containers etc.), food preparation (standard recipe and assembling handbooks); Outbound logistics: Distribution standards, maybe even shared physical distribution, for instance in the Caribbean; Marketing and sales: Some advertising could be typically conducted from the US-based head office or a sub-regional office; * Service: Service standards, uniforms, restaurant interiors; * Procurement: Purchasing lists, supplier selection criteria, supplier contract standards; * Human resource management: Recruitment processes, training programs, function profiles, * payment schedules;
* Research and development: This would typically be centralized in the US; * Infrastructure: Financial systems, internal accounting and reporting standards, quality criteria and programs. Furthermore, cross-border synergies could be reaped by aligning the following positions: Position towards cross-border customers: KFC having the same brand, image and menu in every country could be very appealing for tourists and business travelers; Position towards cross-border competitors: Global rivals dominate the international fast-food business, so to be able to deal with these competitors some sort of global positioning towards them should be established. Secondly, it is inevitable that KFC has to deal with certain...
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