Kfc project of intrntnl business

PROJECT OF INTERNATIONAL BUSINESS

SUBMITTED TO: SUBMITTED BY:MRS. SHELLY TANYA SHARMA

B.B.A. L.L.B. V TRIMESTER.

DECLARATION

I, TANYA SHARMA pursuing BBA LLB (honors) (5th

trimester) at Institute of Technology and Management

i.e. ITM University School of Law hereby declare that I

have completed my project on KENTUCKY FRIED

CHICKHEN (KFC) ‘’ in the academic year of 2011-2012.

The information submitted is true and in the best of

my knowledge.

SUBMITTED TO: SUBMITTED BY:

MRS. SHELLY TANYA SHARMA

B.B.A. L.L.B.

5TH TRIMESTER.

ACKNOWLEDGMENT

This project report could not have been prepared,

without the help and encouragement from various

people. Hence, for the same reason I would like to thank

my guide, mentor and of course my professor

Mrs Shelly . It was from her support that I got proper

guidelines for preparing this project. There are many

other people I would like to thank on the same line

without which this project would have been nonsense

over stilts and the ones who made my project and the

product work for me. All these information is collected

from various sites including the company’s site. Which is

being the most helpful area from which I have gathered

the information and completed this project. I thank all

for making my project good enough.

INTRODUCTION

KFC India

KFC is the world’s No.1 Chicken QSR and has industry leading stature across many countries like UK, Australia, South Africa, China,USA, Malaysia and many more. KFC is the largest brand of Yum Restaurants, a company that owns other leading brands like Pizza Hut, Taco Bell, A&W and Long John Silver. Renowned worldwide for it’s finger licking good food, KFC offers its signature products in India too! KFC has introduced many offerings for its growing customer base in India while staying rooted in the taste legacy of Colonel Harland Sander’s secret recipe. Its signature dishes include the “crispy outside, juicy inside” Hot and Crispy Chicken, flavorful and juicy Original Recipe chicken, the spicy, juicy & crunchy Zinger Burger, Toasted Twister, Chicken Bucket and a host of beverages and desserts. For the vegetarians in India, KFC also has great tasting vegetarian offerings that include the Veg Zinger and Veggie Snacker . In India, KFC is growing rapidly and today has presence in 21 cities with close to 107 restaurants.

HISTORY AND BACKGROUND

KFC History

Way back in 1930’s Colonel Harland Sanders got some distinguished Kentucky folks lickin’ their fingers. It’s been in fashion since then!Colonel Harland Sanders, founder of the original Kentucky Fried Chicken, was born on September 9, 1890.When he was six, his father died and his mother was forced to go to work while young Sanders took care of his three year old sibling. This meant he had to do much of the family cooking. By the time he was seven, Harland Sanders was a master of a range of regional dishes.After a series of jobs, in the mid 1930s at the age of forty, Colonel Sanders bought a service station, motel and cafe at Corbin, a town in Kentucky about 25 miles from the Tennessee border. It is here that Sanders began experimenting with different seasonings to flavor his chicken which travelers loved and for which he soon became famous.During the next nine years he developed his secret recipe of 11 herbs and spices and the basic cooking technique which is still used today. Sander's fame grew. He sold his chicken on the highway! But when the highway was removed, he sold up and traveled the United States by car, cooking chicken for restaurant owners and their employees. If the reaction was favorable Sanders entered

into a handshake agreement on a deal which stipulated a payment to him of a nickel for each chicken the restaurant sold.

By 1964, from that humble beginning, Colonel Harland Sanders had 600 franchise outlets for his chicken across the United States and Canada. Later that year, Colonel Sanders sold his interest in the United States operations for $2 million. The 65-year-old gentleman had started a worldwide empire using his $105 social security cheque. Sadly, Colonel Harland Sanders passed away on December 16th, 1980 aged 90.

His legacy lives on with KFC restaurants all over the world. KFC now stretches worldwide with more than 13,000 restaurants in more than 80 countries and territories around the world serving up the Colonel’s Original Recipe. It is a $13 billion brand based out of Kentucky and is the leading QSR around the world which is based in Louisville, Kentucky. Yum! Brands own 5 brands, out of which KFC is the largest brand within the Yum! Portfolio, founded by Colonel Harland Sanders in the year 1938.

PROBLEMS FACED IN GLOBAL WORLD

In the latest salvo against fast-food chains, KFC is being sued for frying its chicken in cooking oils that contain trans fats, which can contribute to heart disease and diabetes. Here's the skinny on the fat fight:

Why doesn't KFC use a healthier oil? Like most fast-food chains, KFC cooks with partially hydrogenated vegetable oil, which doesn't turn rancid as quickly as healthier, nonhydrogenated oils. "Extra crispy" chicken may also taste better when fried in this oil. "The flavor is crunchier, and you don't get that feeling of fat coating your mouth," says Ted Labuza, a food scientist at the University of Minnesota. But the oil does have dangerous trans-fatty acids.

What's so bad about trans fat? It raises one's bad cholesterol, which boosts the risk of coronary disease. A federal dietary panel has recommended that people consume no more than 2 g per day.Is KFC's food really that unhealthy? The company says its products "meet or exceed all government regulations." But as the Center for Science in the Public Interest, the activist group behind the lawsuit, points out, a three-piece

extra-crispy combo meal contains as much as 15 g of trans fat--more than a person should ingest in a week.

What are other chains doing? Wendy's plans to eliminate trans fats from its food; the Cheesecake Factory is doing so already. McDonald's backpedaled on a promise to cut trans fats and says it's studying alternative oils, as is Burger King.

PROBLEMS FACED BY KFC IN INDIA

The case highlights the ethical issues involved in Kentucky Fried Chicken's (KFC) business operations in India. KFC entered India in 1995 and has been in midst of controversies since then. The regulatory authorities found that KFC's chickens did not adhere to the Prevention of Food Adulteration Act, 1954. Chickens contained nearly three times more monosodium glutamate (popularly known as MSG, a flavor enhancing ingredient) as allowed by the Act. Since the late 1990s, KFC faced severe protests by People for Ethical Treatment of Animals (PETA), an animal rights protection organization. PETA accused KFC of cruelty towards chickens and released a video tape showing the ill-treatment of birds in KFC's poultry farms. However, undeterred by the protests by PETA and other animal rights organizations, KFC planned amassive expansion program in India

RE-ENTRY OF KFC INTO INDIAN MARKET

A case in point is KFC. KFC entered India in 1995, but a controversy surrounding the levels of MSG in its preparations and subsequent protests from farmers' groups and animal rights activists spelt trouble for the company. Ultimately, the company had to shut all but one outlet in the country. Only recently in 2003 it made a quiet re-entry into the Indian market. Then came up with the strategies and menu that is desirable by the Indian consumers. And since 2003 it is expanding successfully its business in India.

Mission statement“To be the leader in western style quick service restaurants through friendly service, good qualit food and clean atmosphere ”

Goals of KFC

Build an organization dedicated to excellence. Consistently deliver superior quality and value in our products and services. Maintain a commitment to innovation for continuous improvement and grow, striving always to be the leader in the market place changes. Generate consistently superior financial returns and benefits our owner and employees. To establish in India our position as leading WQSR (Western Quick Service Restaurant) chain, serving good value. Innovative chicken-based products. Consistently, providing a pleasant dining experience, with fast friendly, in a clean and convinient locations. All the times we must dedicated to providing excellent and delighting customers.

OUTCOME OF CASE STUDY OF KFC IN RESPECT OF SRC(SELF REFERENCE CRITERION)

KFC has not understood the significance of cultural, economic, regulatory and ecological issues while establishing business in a country like india .»KFC has not Appreciated the need for protecting animal rights in developed and developing countries like India.» They have not understood the importance of ethics in doing business.»They have not examine the reasons for protests of PETA.

The case highlights the ethical issues involved in Kentucky Fried Chicken's (KFC) business operations in India. KFC entered India in 1995 and has been in midst of controversies since then. The regulatory authorities found that KFC's chickens did not adhere to the Prevention of Food Adulteration Act, 1954. Chickens contained nearly three times more monosodium glutamate (popularly known as MSG, a flavor enhancing ingredient) as allowed by the Act. Since the late 1990s, KFC faced severe protests by People for Ethical Treatment of Animals (PETA), an animal rights

protection organization. PETA accused KFC of cruelty towards chickens and released a video tape showing the ill-treatment of birds in KFC's poultry farms.

STRENGHTS OF KFC

Strengths can be found internally in a company and can be used to the company’s advantage. The strengths identified are as follows:

1. KFC's secret recipe.

The secret recipe has long been a source of advertising, and allowed KFC to set itself apart. Also, KFC was the first chain to enter the fast-food industry, just before McDonald's, which opened its first store a year later, and the "secret recipe" was the initial home replacement strategy.

2. Name recognition and reputation.

KFC's early entrance into the fast-food industry in 1954 allowed KFC to develop strong brand name recognition and a strong foothold in the industry. The Colonel is KFC's original owner and a very recognizable figure, both in the U.S. and internationally, in their new logo. In fact, in the fourth annual LogoValue Survey, done by The Schecter Group, the KFC logo was the only one which significantly enhance the brand's image (Logos add…1).

3. PepsiCo's success with the management of fast food chains. PepsiCo acquired Pizza Hut in 1977, and Taco Bell in 1978. PepsiCo used many of the same promotional strategies that it has used to market soft drinks and snack food. By the time PepsiCo bought KFC in 1986, the company already dominated two of the four largest and fastest-growing segments of the fast food industry (Wright, p.424-426).

4. Traditional employee loyalty:"KFC's culture was built largely on Colonel Sanders' laid back approach to management" (Wright, p.433). Before the acquisition of KFC by PepsiCo, employees at KFC enjoyed good benefits, a pension, and could receive help with other non-income needs. This kind of "personal" human resources management makes for a loyal workforce (Wright, p.434).

5. Improving operating efficiencies by reducing overhead and other operating costs can directly affect operating profit.Due to the strong competition in the US, the fast-food chains are reluctant to raise prices to increase profit. Many of the chains are turning to operating efficiencies to increase profit. For many companies, operating efficiencies are achieved through improvements in customer service, cleaner restaurants, faster and friendlier service, and continued high-quality products.

WEAKNESS

Weaknesses are also found internally like strengths. Weaknesses, however, can limit a company’s potential. The weaknesses for KFC are identified as follows:

1. The many sales of KFC lead to a confusing corporate direction.Between 1971 and 1986, KFC was sold three times. The first two sales, to Heublein, Inc and to R.J. Reynolds, left the company largely autonomous. It wasn't until the sale to PepsiCo in 1986 that changes in top management started to take place. These changes happened almost immediately after the sale.

2. KFC has a long time to market with new products.Because of the nature of the chicken segment of the fast food industry, innovation was never a primary strategy for KFC. However, during the late 1980's, other fast food chains, such as McDonald's, began to offer chicken as a menu option. During this time, McDonald's had already introduced the McChicken while KFC was still testing its own chicken sandwich. This delay significantly increased the cost of developing consumer awareness for the KFC sandwich.

3. Conflicting cultures of KFC and Pepsi Co.

While KFC's culture was largely based on the Colonel's laid back approach to management, while PepsiCo's culture is more of a "fast track" attitude. Employees do not have the same level of job security that they enjoyed before the PepsiCo acquisition.

4. Turnover in top management.PepsiCo bought KFC in 1986. By the summer of 1990 PepsiCo's own management had replaced all of the top KFC managers. However, by 1995 most of this new PepsiCo management had either left the company or been moved to a different division. In addition, Kyle Craig, who was named president of KFC's US operations in 1990, left in 1994 to join Boston Market.

5. Recent contractual disputes with franchisees in the United States.This is also an example of the conflicting cultures of KFC and PepsiCo. KFC's franchisees had been used to little interference from corporate offices. In 1989, the CEO announced new contract changes - the first in thirteen years. "The new contract gave PepsiCo management greater power to take over weak franchises, to relocate restaurants, and to make changes in existing restaurants" (Wright, p.434). The franchisees protested these changes and the relationship between the corporate KFC and the franchisees in the United States have been strained ever since this announcement.

OPPORTUNITIES TO KFC

New Markets: Globalisation has opened doors for new markets for the company. As the developed markets are mostly saturated, the developing countries like India and China promises a good market and generation of demand in the future. With more than 70% of the markets in india being unexplored and un organised, KFC has a good scope of expanding its operations in the country.

Cross Culture: Generally there is a good acceptance of American culture of fast food in India. People are opening up to fast foods more regularly in their daily lives and not just keeping it a once in a month affair. Thus Indian mindset is fast changing.

Large Youth population: India has a very large share of youth population a compared to other countries. More than 60% of the population is under the age of 30yrs. As the young generation are more open to fast foods and demand it more, this is a good news for the company.

New variety: Company can also come up with new variety in the menu likePizzas, garlic breads to attract more customers.

THREATS TO KFC

Competition: Competitor companies like McDonalds are fast catching up with the market. McDonald’s with sales of more than 19 billion in 1999, accounted for 15 percent of the sales of the nation’s top 100 restaurant chains.

Organizations like PETA People for Ethnic Treatment for Animals have given a bad name to the company which may prove disastrous to the image of the firm. Currently, KFC is under massive attacks from animal organizations, questioning the way KFC’s suppliers are threatening the chicken, before they got slaughtered. Anti-KFC campaigns, such as the one from PETA are affecting KFC’s brand image in a negative way and result in direct dollar losses, as less people are consuming KFC chicken.

Saturated US Market: Now KFC cannot rely on just its home market to generate sales. As the US markets are already saturated and leave no or little scope for growth, company necessarily needs to look at offshore foreign markets to generate sales and keep up the profits.

PROBLEMS

Through an analysis of the strengths, weaknesses, opportunities, and threats of KFC, the following potential problem areas were identified:

1. No defined target market.The advertising campaign of KFC does not specifically appeal to any segment. It does not appear to have a consistent long-term approach. The U.S. has enormous changes in its demographics. Single-person households have increased from 12% in 1970 to 25% in 1995. With this kind of dramatic change, KFC does not have a proper approach to its target market.

2. Saturation of the U.S. Market.There has been an increase in the overall number of fast-food chains. Access to restaurants is now easier due to non-traditional locations, for example in airports and gas stations. Also, the age of Americans tends to change the frequency of eating out.

3. Health Conscious Consumers.There has been a trend toward an increasingly healthy diet in America. This put KFC at an extreme disadvantage due to its fried product offering.

4. Increased Start Up Costs.

Prime locations have increased in cost due to limited room for expansion. New technology has increased efficiencies, but resulted in greater increased start up costs. Restaurant and equipment packages range from $500,000 to $1,000,000.

ENVIRONMENTAL FACTORS AND OPPORTUNITIES

Political

The operations of KFC are affected by the government policies on the regulations of fast food operation. Currently government are controlling the marketing of fast food restaurant because of health concern such as cardiovascular and cholesterol issue and obesity among the young and children in the country. Governments also control the license given for open the fast food restaurant and other business regulation need to follow such as for a franchise business. Good relationship with government in giving mutual benefits such as employment and tax is a must for the company to succeed in any foreign market.

Economic

Though for last 1 year their was economic slowdown all across the globe but the sales of KFC and other fast food chains did not slow down to that extent that of other sectors in. The GDP (Purchasing Power Parity) is estimated at 2.965 trillion U.S. dollars in the year 2010. The GDP- per Capita (PPP) was 2700 U.S. dollars as estimated in 2008. The GDP- real growth rate in 2007

was 8.7%. India has the third highest GDP in terms of purchasing power parity just ahead Japan and behind U.S. and China. Foreign direct investment rose in the fiscal year ended March 31 2007 to about $16 billion from just $5.5 billion a year earlier. There is a continuous growth in per capita income; India’s per capita income is expected to reach 1000 dollars by the end of 2007-08 from 797 dollars in 2006-07. This will lead to higher buying power in the Hands of the Indian consumers. So taking into considerations the economic factors of India KFC is safe. The only danger to it will be if there is a terrorist attack in India and the victim is KFC

Socio Cultural

India is the second most populous nation in the world with an approximate population of over 1.1billion people. This population is divided in the following age structure: 0-14 years – 31.8%, 15-64 years – 63.1% and 65 years and above – 5.1%. There has also been a continuous increase in the consumption of fast food in India. The social trend toward fast good consumption is changing and India has seen an increase of 90% fast food consumption from the year 2002- 2007. This increase is far greater than the increase in the BRIC nations of Brazil (20 per cent), Russia (50 per cent) and China (almost 60

per cent) Thus this shows a positive trend for fast food industries in India.

Technological

The Indian fast food Industry is heating up with a lot of foreign players entering the Indian market. The technological knowhow and expertise will also enter the Indian market with an increase in competition. With the lower rates and increase technology the fast food counters are attracting youth by giving them attractive deals. For e.g. KFC and Domino’s pizza. For a fast food restaurant, technology does not give a very high impact on the company and it is not a significant macro environment variables. However KFC should be looking to competitors innovation and improve itself in term of integrating technology in managing its operation. For example in inventory system, supply chain management system to manage its supply, easy payment and ordering systems for its customers and wireless internet technology. Implementation of technology can make the management more effective and cost saving in the long term. This will also make customer happy if cost savings results in price reduction or promotional campaign discount which will benefits them from time to time.

Environmental As one of world largest consumer of beef, potatoes and chicken, KFC always had been critics for world environmentalist. This is because high consumption of beef causing the green house effect by methane gasses coming from the cow’s ranch. Large-scale plantation has effect the environment and lost of green forest opening for plantation activities. Vegetarian environmentalist criticizes the fast-food giant for cruelty to animals and slaughtering. In America, once KFC want to introduce whale burger causing uproar because whales are endangered species. Before using paper packaging, KFC once had been criticized for being insensitive to pollution because of using ne based packaging for its food products. Imagine millions of people purchase from fast food operator and how is the impact to world environment by throwing away those hard to recycle packaging.

Our world is getting concern on environment issue and business operating here should not just care for profit, but careful usage of world resources for sustainable development and care for environment safety and health for our future generation. Critics and concern from all public or activist should be review and support if necessary to ensure we play our social responsibility better.

Legal factors

As a certified fast food operator, there are many regulations and procedures that KFC should follow. For example is the Halal certification that becomes a concern to Muslim consumers. KFC should protect its integrity and consumer confidence by ensuring all materials and process are as claimed or must followed. Other legal requirement that the business owner should follow as stipulated in laws are such as operating hours, business registration, tax requirement, labor and employment laws and quality & environment certification (such as ISO) in which the outlet has been certified. The legal requirement is important because the offenders will be fined or have their business prohibited from operating which can be disastrous.