EXECUTIVE SUMMARY

http://www.scribd.com/doc/31608312/Structural-Analysis-KFC

One of the major models of analyzing a companys competitor position in themarket is given by Porter. Porters five forces comprising of threats of newentrants, bargaining power of buyers and suppliers, threats of substitutesand the rivalry among existing competition determine the degree to whichi n v e s t m e n t i n a p a r t i c u l a r i n d u s t r y w i l l d r i v e r a t e s o f r e t u r n t o the freem a r k e t l e v e l . I n s h o r t , p o r t e r s f i v e f o r c e s d e t e r m i n e a c o m p a n y s profitability and opportunities in the industry.KFC, one of the largest chains of fast food restaurants faces all these forces and tends to eliminate them to strengthen market position. KFC has been inthe fast food industry since the 1930s. It entered Pakistan in 1907 and hascarried out successful business. It is a well established multinational offeringa premium experience of value added chicken meals and ot her fast food toits customers.K F C h a s p u t u p m o d e r a t e b a r r i e r s t o e n t r y f o r p o t e n t i a l e n t r a n t s . H e n c e , although it is not very difficult to enter the fast food industry, it is extremelyd i f f i c u l t t o e n t e r a s K F C s c o m p e t i t o r . W e l l e s t a b l i s h e d b r a n d n a m e , h i g h economies of scale, a moderate level of product differentiation, high capitalr e q u i r e m e n t s a n d a c c e s s t o d i s t r i b u t i o n c h a n n e l s m a k e i t a s u c c e s s f u l business altogether and thus makes it difficult for a new entrant to enter theindustry and compete with it.Rivalry among existing competitors is moderate, since all major players havea prominent position in the market. Price competition exists, but KFC focusesmore on differentiating and marketing efforts to raise sales than bitter pricew a r s a n d a d v e r t i s i n g b a t t l e s . E x i t b a r r i e r s f o r t h e f i r m a r e h i g h d u e t o accountability to not only its loyal customers but its suppliers, employeesand the band name itself. High exit and entry barriers promise high returnsb u t m a k e t h e f i r m r i s k y a t t h e s a m e t i m e . A n e w e n t r a n t p r o m i s i n g K F C s special recipe at a lower price will definitely hurt the company.Substitute products for KFC have gained power due to renewed health ando b e s i t y c o n c e r n s . I n P a k i s t a n , i s s u e s l i k e n o t u s i n g H a l a l c h i c k en haveseriously damaged the brand, but KFC has overcome this b

y e f f e c t i v e marketing and branding efforts. However, during the process it lost some of the trust people placed upon it and has given space to substitutes like madeto order and ready made recipes. KFC loyal customers will however not shiftto substitutes due to high switching costs which can be both monetary and emotional.

Customers usually are given great importance

and their feedback is deemedto be critical for the

companys performance. However, they do not have

thepower to bargain with the company unless major issues arise

which affect agroup of customer for example issues of

halal meat and opera coupons.KFC s customer base is huge

and although it wants to fulfill most of

itscustomers demands it is not inclined to fulfill each

and every demand theyimpose. Suppliers are a major part

of KFCs value chain. Both KFC and its suppliersbrin

g benefit to each others brand names. Among all

the suppliers, themaximu m bargainin g power can be said to

be with Pep si and K n N s.Although, both will not want to

loose partnership with KFC, they have thepower to

bargain to a certain extent, being as big and as successful. T

he analysis, in conclusion, suggests KFCs strong position in

the competitivee nvironmental, partly because of

its differentiated marketing and operationalst

rategies. It can work upon decreasing exit barriers

and be less liable to thestake holders and so acquire

the best position in the market.Altho ugh not oper

ating in the blue ocean, KFC competed majorly on it

svaluable resources. These include both tangible and

intangible resources.Fu rthermore, it keeps leveraging

and investin g in them to stay ahead in thegame. Also, it can

use the same strategy to enter a blue ocean by combiningfor

instance food with amusement. KFC also utilizes game

theory to change the game to its advantage. It is

alsoinvolved in creating w inwin situation s for the ind

ustry. Altho ugh, moststr ategies are employed to be ahead

than competition, they imitated and sobenefit the

industry on the whole.Furthe rmore, the chain

focuses on competing on the edge. This is evidentfrom

its rich and successful operational history. The organization

al hierarchyis neither too structures nor chaotic. Team play is

efficient but answerablea nd accountable for actions.

A critical mass of people is always kept withinthe

firm which includes both experienced and new employees.

The firm alsobuilds upon its past concepts

utilizing the concepts of modularity to gainadvanta

ge from them.