COMPANY ANALYSIS

NICKO HAWINATA / 01120090094

A. Case Abstract

KFC is the world largest and most well known chicken restaurant, with
chains in more then 10 thousand locations and worldwide in 80 countries. KFC
and its franchised employees are more than 200 thousand in all over the world. John Y
Brown and Jerry Messy purchased KFC for USA for $2 million in 1964 that time KFC
become a corporation. After five years, Colonel buys first 100 shares of KFC. In 1986,
Pepsi Company purchased KFC. Pepsi company changed the logo from Kentucky fried
chicken to KFC in 1991 and then in 1992 KFC’s 1000th restaurant opened in Japan and in
1994 they opened their 9000th restaurant in china. KFC Corporation, based in Louisville,
Kentucky, is the world's most popular chicken restaurant chain, specializing in Original
Recipe®, Extra Crispy®, Kentucky Grilled Chicken™ and Original Recipe Strips with
home-style sides, Honey BBQ Wings, and freshly made chicken sandwiches.

Everyday, more than 12 million customers are served at KFC restaurants in 109
countries and territories around the world. KFC operates more than 5,200 restaurants in the
United States and more than 15,000 units around the world. Customers around the globe
also enjoy more than 300 other products -- from Kentucky Grilled Chicken in the United
States to a salmon sandwich in Japan.

KFC is part of Yum! Brands, Inc., the world's largest restaurant company in terms
of system restaurants, with more than 36,000 locations around the world. Yum! Is in fact
are already a truly global growth company, with approximately 65% of their profit coming
from outside the United States, including commanding positions in China and the emerging
markets. The company is ranked #239 on the Fortune 500 List, with revenues in excess of
$11 billion in 2008.

David Novak is Yum!’s current CEO and President since 2000. Novak shapes the
company's overall strategic direction, including four key growth strategies: 1) build leading
brands across China in every significant category; 2) drive aggressive international
expansion and build strong brands everywhere; 3) dramatically improve U.S. brand
positions, consistency and returns; and 4) drive industry-leading, long-term shareholder and
franchisee value. Additionally, he devotes much of his time each year to personally train
leadership skills to the company's management and franchisees, emphasizing teamwork and
a belief in people that rewards and recognizes customer-focused behavior. Yum! Achieved
17% EPS growth in 2010, the best in their one last decade.

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B. Vision Statement

To be the world’s leading kitchen for convenient meals.

C. Mission Statement

To be the leader in western style quick service restaurants through friendly

service, good quality food and clean atmosphere.

Philosophy of KFC

Philosophy of KFC stands on “the Champs Program”. Champs stands for the belief that the most
important thing each of us can do is to focus on the customer. It stands for the commitment to
provide the best food and best experience for the best value. CHAMPS stand for the six universal
areas of customer expectation common to all cultures and all restaurants concepts. These are:

C le a nline ss
H osp i t a l i t y
A ccuracy
M aintenance of Facilities
P roduct Quality
S peed of Service

CHAMPS is the philosophy to ensure that the customer has the consistent
quality experience in every restaurant, everyday, on every occasions and they will
be playing role in delivering CHAMPS to their customers.

D. External Audit

Opportunities

1. The rapid growth of economy in China where KFC has established strong
market position there, expected to grow their consuming class from 450 million
to 650 million in 2020 (pg.5).
2. KFC is expecting future growing market in emerging countries like India,
Vietnam, Russia, Pakistan and African continent (pg.7).
3. Opportunity to leverage existing assets by expanding KFC’s Krusher frozen
beverage line, expanding non-fried products and testing breakfast (pg.7).
4. The global consuming class population outside US and China are expected to
grow to 2 billion people from 1.1 billion people today (pg.7).

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 Threats

1. McDonalds and Domino’s as Yum!’s global competitor. (pg.5)

External Factor Evaluation (EFE) Matrix

Key External Factors Weight Rating Weighted

Score
Opportunities
1. Rapid growth of economy in China
0.30 4 1.20
2. KFC is expecting future growing 0.20 3 0.60
market in emerging countries
3. Opportunity to leverage existing assets 0.15 3 0.45
by expanding KFC’s Krusher frozen
beverage line, expanding non-fried
products and testing breakfast
4. The global consuming class population 0.15 3 0.45
outside US and China are expected to
grow
Threats
1. McDonalds and Domino’s as 0.20 3 0.60
Yum’s global competitor.
TOTAL 1.00 3.30

CPM – Competitive Profile Matrix

KFC McDonalds Domino’s

Critical Success Weight Rating Weighted Ratin Weighted Rating Weighted
Factors Score g Score Score
Advertising 0.10 3 0.30 2 0.20 2 0.20
Product Quality 0.20 4 0.80 4 0.80 4 0.80
Price comp. 0.10 3 0.30 3 0.30 2 0.20
Management 0.15 3 0.45 3 0.45 3 0.45
Global expansion 0.15 3 0.45 4 0.60 2 0.30
Market share 0.10 2 0.20 3 0.30 2 0.20
Customer loyalty 0.20 3 0.60 3 0.60 3 0.60

TOTAL 1.00 3.10 3.25 2.75

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E. Internal Audit

Strengths

1. KFC has established a very strong market growth in China (pg.5).

2. Has credible General Managers, over than 70% of them are at least college
graduate (pg.5).
3. Has their own food distribution system and one of the largest real estate and
construction teams anywhere in the world (pg.5).
4. Yum! Has a strong economic condition to backup any unforeseen
challenges.(pg.10)

Weaknesses
1. Weak KFC market position in the U.S., only contribute 3% to the overall profit
of the company (pg.9)

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors Weight Rating Weighted

Score
Strengths
1. KFC has established a very strong market
growth in China 0.30 4 1.20
2. Has credible General Managers
0.20 4 0.80
3. Has their own food distribution system and one
of the largest real estate and construction teams 0.15 3 0.45
anywhere in the world
4. Yum! Has a strong economic condition to
backup their brands 0.20 3 0.60
Weaknesses
1. Weak KFC market position in the U.S. 0.15 4 0.60
TOTAL 1.00 3.65

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F. SWOT Strategies

SWOT MATRIX STRENGTH WEAKNESS

1. KFC has established a 1. Weak KFC market
very strong market position in the U.S.
growth in China
2. Has credible General
Managers

OPPORTUNITIES S1 O1 – Maintain
1. Rapid growth superiority of market
of economy in position in China against
China competitors.
2. KFC is S2 O2 – Train and assign
expecting qualified General
future
Managers into emerging
growing
market in countries to ensure stable
emerging growth
countries.

THREATS S2 T1 – Keep and raise W1 T1 – Keep improving

1. McDonalds more credible general and reach up with
and Domino’s managers globally McDonald’s market in the
as Yum’s US
global
competitor.

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Yum’s Financial Ratios

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McDonald’sFinancial Ratios

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G. KFC in Indonesia

PT Fastfood Indonesia Tbk. is the sole owner of the KFC franchise in Indonesia, was
established by Gelael Group in 1978 as the first party who obtained the KFC franchise for
Indonesia. The Company began operating its first restaurant in October 1979 in Jalan
Melawai, Jakarta, and the successful outlet is then followed by the opening of further
outlets in Jakarta and the expansion of the coverage area to the other big cities in Indonesia
such as Jakarta, Semarang, Surabaya, Medan, Makassar and Manado. The successes
achieved in the development of the brand continues to make KFC fast-food franchise
business as well-known and dominant in Indonesia.
Joining of the Salim Group as major shareholder has enhanced the development of the
Company in 1990, and in 1993 registered as issuers in the Jakarta Stock Exchange as a step
to further promote its growth. Ownership of a majority stake in the current distribution is
79.6% with 43.8% for PT Pratama Gelael of Gelael Group, and 35.8% for PT Megah
Eraraharja of the Salim Group, while a minority share (20.4%) were distributed to the
Public and Cooperatives.
The Company has just inaugurated the opening of KFC outlets to 300 in Cireundeu in
October 2007, coinciding in the same month anniversary of KFC Indonesia to 28. The
Company ended the year 2007 with a total of 307 outlets including mobile catering, which
are scattered in 78 cities across Indonesia, employing a total of 11,835 employees with
annual sales of more than Rp. 1.590 trillion.
Company's performance in same store sales growth makes it one of the KFC franchise
best market in Asia with an average growth of 8.5% in 2007 and will continue to maintain
this position. The continuous development of the brand through innovative marketing
strategies, operational excellence, and a consistent double-digit growth in sales and
restaurant development, the Company has received numerous awards from the Asia
Franchise Business Units from Yum! Restaurants International.

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H. Epilogue

KFC, along with McDonalds as it’s main competitor, and other major
fastfood chains have dominated the Ameri can continent as well as elsewhere.
Since the 1950’s when the founder of KFC (Colonel Harland Sanders) had a
dream, of building an empire in the fast foodm a r k e t , t h e c o m p a n y h a s
u n d e r g o n e l o t s o f c h a n g e s . T h e c o m p a n y h a s c h a n g e d ownership; it was
taken over from Pepsi and passed over to Tricon (now named Yum!), which owns Pizza
Hut, Taco bell and others. Nowadays, KFC, still dominates the chicken fast food industry
while it has stores in more than 100 countries operating vast profits. Although, due
to increased conditions of life, and differentiation of the life style of the population around
the world, there is still a lots of room for expansion, especially in countries with
large population and high development rate.

Globally KFC is falling behind McDonald’s in terms of number of outlets. But KFC
is one of the most popular fast food chains in China, with more than 2,100 locations in 450
cities. Perhaps surprisingly, McDonald's is not nearly as successful, with only about half
the number of restaurants. This is the reverse of the situation in the United States, where
McDonald's is often considered to be number one while KFC trails behind.

So why do the Chinese prefer KFC to McDonald's? The blog “The China Expat”
has a few possible answers. One of them is that KFC caters better to Chinese tastes than
McDonald's does. For example, KFC's menu includes Traditional Peking Chicken Rolls,
Preserved Sichuan Pickle and Shredded Pork Soup, Happy French Fry Shakes (with beef,
orange and Uygur barbecue spices) and for breakfast a Chinese-style porridge called
congee. McDonald's caters its menu to international tastes, but not to the same extent in
China.
The KFC business has been absolutely rock solid. Yum! now has over 3,200 KFCs
in over 700 cities in China, with $1.4 million average unit volumes. KFC added 414 new
locations in 2010 and continue to see cash paybacks in less than 3 years on new restaurants.
The good news is that the growth and results were driven by increased traffic as KFC made
good progress leveraging its assets with 24-hour operations, delivery service and continuing
to build a solid breakfast business. With the current growth of their market in China, it has
become Yum’s most profitable market in the long run.

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