The five-force analysis suggests that KFC faces a very active and rigorous competition.
There is extreme rivalry in the fast food industry. There are more then a hundred other fast food businesses that KFC competes with.
Statistics show that there is always threat of new competition as there are new chains developing from time to time in the industry. The reason behind such a threat existing is due to the fact that the industry is a highly profitable market.
There a various number of substitutes that KFC faces as competitive forces such as fine dining, different fast food concepts such as Mexican, Chinese, Italian etc.
There is not a significant pressure from supplies in terms of bargaining as there are also a vast number of supplies available to supply the fast food Industry.
When it comes to bargaining between seller and buyer, there is heavy competition, due to the fact that there are many other fast food chains with the same restaurant concept as KFC, with whom KFC competes with. 2.
The competitive factors to be considered to succeed in the fast food industry: -
To succeed a fast food chain should always be working in improving their quality of food they offer to their consumers.
The development of new product from time to time is critical to stay on top of the market; consumers always look forward to new products that businesses have to offer.
The frequent analysis of demographics helps the business to keep active awareness of a risk in the change of their target market in a particular area. The analysis helps businesses keep track of any change needed to cater to changing demographics. 3.
KFC's internal strengths and weaknesses: -
One of KFC's internal strengths is its early experience in the international market. Due to the fact that it was among the first to enter the market it had early experience on what international markets demanded while other chains where still experimenting.
The independent franchising strategy resulted to loyal and competitive franchisees, which leaded to a strong competitive force.
A weakness that KFC had was the fact that there menu was limited and new products where rarely or slowly coming in. External opportunities and threats
A external opportunity that KFC has is that it can expand its operations to Latin America which consisted of countries which held potential for a new fast food chain.
The threats that KFC would have externally would be the competition against them that is every growing and new ones erupting.
Another threat would be the political, Economic and natural risks of countries they would like to expand into. 4. Major strategic issues surrounding KFC's decision to expand or freeze growth in Latin America: -
One factor that KFC's considered to be the reason to freeze growth, is because the countries have constant changes in political status and economic environment.
Expanding growth in the some Latin countries was beneficial because of the free trade agreement that was arranged between them and the U.S.
Due to the fact that geographic proximity between the countries was as such that communication and travel was made easy, this point would hold as a plus in the idea of expanding to these countries. To Expand in Mexico: -
Transportation costs where relatively low.
American products where highly excepted in Mexico
There was free trade between the countries.
Labor was by far cheaper in Mexico then in the U.S
To Freeze Operations in the U.S
High import and export tariffs being imposed.
Most of the industries where owned and run by the government, thus causing less effort being put in importation. 5. Latin America is a attractive market with great opportunities, but great opportunities come with great risks. KFC will have to definitely undergo a certain level of risk if they expand to Latin America. The costs of operating in these countries are relatively low, there is good understanding between government and the...
References: 4. Kleindl, Brad Alan, 2001, "Strategic E-Marketing: Managing E-Business" South-Western Publishing
5. Susan Dann and Stephan Dann, 2000, "Strategic Internet Marketing", John Wiley and Sons
8. Subhash C. Jain, (2001), "International Marketing", 6th Edition, South-Western College Publishing
KFC continued to dominate the chicken segment, with sales of $4.4 billion in 1999.(Source; Jeffrey A Krug, 2001)
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