CHAPTER 1
Introduction
This research is replicated from a research paper titled “Factors Influencing
Generation Y’s Purchase Intentions of Prototypical and Me-too Brands” authored by
Vanessa Quintal, Ian Pau, Daniel Simss, and Isaac Cheah (2016). In this specific chapter of the journal, the authors provide information about generation Y’s purchase intentions by examining the perceived risk, self-confidence, extrinsic attribute, and perceived quality of a specific product in a way that can drive generation Y’s purchase intention.
1.1 Background
Generation Y is the early adopter of the new technology (Kumar. 2009). Generation Y is a generation who was born after generation X, specifically they were born between
1977-1994 ( Sullivan & Hetmeyer, 2008). And based on Rugimbana (2007)
Generation Y is the largest demographic segment in most developed country. Since gen Y is being in the early stages of consumer lifecycle, the group mostly consist of single young professionals, tertiary students, and married young professional couple
(gurau, 2012). Dr. Grace Judio Kahl stated that With the change of lifestyle pattern in
Indonesia, with the faster life pace that happen in recent year, this change of lifestyle cause Indonesian people especially generation Y tend to choose something instant for their option especially in food and beverage sector (Suara.com, 2012).
The development of fast food restaurants in Indonesia stated by director of investor relations of corporate secretary of PT. Mitra Adi Perkasa Tbk (MAP) Fetty Kwartati in an interview to kompas.com in 2013. According to Kwartati, the high growth of
1 fast-food restaurant industry in Indonesia is caused by the desire of the young to get fast paced service. Indonesia is one of the most populated country in the world. Given that most of the population falls in productive age bracket, it is not a surprise that the income per-capita has grown quite rapidly. The PT. Mira Asset Sekuritas stated that
Indonesia’s young demographics are leading to demand western food product.
Figure 1. 1 Generation Y population
Source: Jajak Pendapat
Based on the data from JAKPAT Gen Y aged 23-40 has overlapped Gen X in
Indonesia, almost 60% of productive citizen, it proved that generation Y is dominating the workplace. 59.71% of productive Indonesian are gen Y which approximately 97,327,300 citizens. With the increase number of fast food fried chicken outlet in Indonesia, at this time, fast food restaurant is the right choice amidst the economic situation and the development of the population of Indonesia. This growth indicates that fast food restaurant has the potential to grow and has the better prospect continues promise in food and beverage business. More and more companies
2 emerge in the same industry, is due to the promising market demand. The table below shows the top 5 biggest fast food outlets in Indonesia.
Figure 1. 2 Number of Fast Food Outlets Source: PT Mirae Asset Sekuritas
Since the term fast food is too broad, this research has narrowed down to prototypical brand and me-too brand in fast food industry that specifically sells fried chicken as their main product. Since according to table 1.2 fast food that sells fried chicken has the biggest outlet and continue to grow and expand the business more
1.2 Brief History of Fast Food Chain
The concept of eating outside of the home has been around for centuries, but,
fastfood chain that we know didn’t get its start until the post-WWII (Franklin e
Jacobs. 2013). According to Parsa and Kahn (1991) quick service resturant can be
categorized into four life cycle stages: Pre-introductory stage (pre 1950’s),
Introudctory stage (early 1960’s), growth stage (early 1960’s to 1980’s).
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1.2.1 Pre-Introductory Stage (Before 1950’s)
World War II has provoked several adjustment within the food service, one of
them is fastfood chain. In the 1940’s labor and food shortaged was occurred. As a
result, dehydrated food and portiob-controlled packages were introduced to
overcome the product shortage and to moderate waste. And hamburger and fried
chicken was introduced as the staple family diners in U.S.A . the NRA slogan for
1947 was “Eating Out is Fun… Take the Family Often” (industry Report, 1979).
1.2.2 Introductory Stage (1950’s - Early 1960’s)
According to Parsa and Kahn (1991) As stated in Industry Report, this rapid
growth direcly correlated to specific factors,such as increased population, more
travel, shorter work week, more suburban restaurant, more flexible work pattern,
and eating out as a budgeted family habit (Rolmar, 1979) As stated in Industry
Report, this growth wasdirectly attributable to specific factors, such as increased
population, more travel, a shorter workweek, more suburban restaurants, work
patterns which were conducive to eating out, increased demand for take-home
food, and eating out as a budgeted family habit (Rolmar, 1979). During this
period, most restaurant chains featured limited menus, core product specialization,
low prices and limited service (Parsa and Kahn, 1991).
1.2.3 Growth Stage (Early 1960’s - Early 1980’s)
During this period, convenience service has became a major trend, the new
creation of kitchen modification and design (such as deep frier, streamers &
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improved conventional ovens) has helped the industry to provide a faster time to
produce more food (Parsa and Kahn, 1991).
1.2.4 Maturity Stage (Early 1980’s - Late 1980’s)
This stage saw a decline in the QSR industry due to a number of factors, such as
bankruptcies, mergers, acquisitions, and basic economic failures. In addition, the
consumer continued to be calorie conscious, which forced fast food chains to
change their menus and include salads and other healthy alternatives (Parsa,
1989). The 1980’s witnessed yet another trend in the foodservice industry: home
delivery. Domino’s Pizza experienced overwhelming success with this innovation,
which made this trend popular. Though the 1980’s witnessed a decrease in growth
rate in quick service restaurants, they still managed to steadily increase their
market share 10% from 1980 to 1988 (Gallup, 1988).
1.2.5 Emerging Trends (Late 1980’s - Present)
In the 21st century it has brought its own demand to the fast food restaurant
industry. With the advent of cell phones and computers, there has been an increase
in take-out ordering using mobile devices. In addition, niche market has become
one of the most popular market in consumer perspective. Furthermore, there has
been an increase in interest in organic, locally-grown food and this has had an
additional impact on QSRs. Greater environmental awareness has motivated
consumers to be more discerning regarding biodegradable and recyclable
products, which puts more pressure on QSRs to provide these higher costs
supplies. Finally, innovative food choices are increasingly more available at fast
food restaurants, as well as nontraditional locations.
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1.3 History of fast food chain in Indonesia
The economic growth in Indonesia is also one of the factors why the rapid
increase of fast food chain, based on Nielsen’s survey in 12 cities in Indonesia, the
number of middle and high income citizen has increased from 46% in 2008 to
62% in 2010. With this kind of development, many retailers started to see
Indonesia as a promising market for fast food chain. Fastfood chain has widely
spread around the world, as well as Indonesia. As the amount of middle class in
Indonesia has increased, the amount of people who create a fastfood franchise is
beyond overwhelming. Moreover, when the monetary crisis occurred in 1998, the
number of fastfood chain in Indonesia increased up to 74.2% (Ben Bland, 2013).
Based on the survey that was conducted by AC. Nielsen in 2010 that 28% of
Indonesian consume fast food product once a week and 33% of them consume it
at lunch time. So, eating fast food is considered as a common thing for
Indonesian.
1.4 Prototypical Brand
Generally, according to Kalamas (2006), brands might be sorted as prototypical and me-too. A prototypical brand is characterized as having more prominent level of family likeliness, with more properties that are normal for an item classification, or you can say it possesses a greater degree in family resemblance (Kalamas, 2006;
Ward 1994). Such traits are esteemed (Loken and Ward, 1990) since they are a more natural model of an item class (Han, 1998) For prototypical brand, KFC is one of the biggest fast food chain in Indonesia and it is suitable for this research since both company is already got the title of market share leader (Veyzer & Hutchinson, 1998).
Based on authenticity and familiarity prototypical brand Friezen and Moriarty (2015)
6 stated that “prototypical brands is relatively close to the consumer who feel they know the brand very well” and “in term of authenticity, whoever perceived first is original, but the rest are followers”. So, based on the definition, in fast-food fried chicken industry, if you think about fried chicken, KFC will be the first think that come to your mind as a prototypical brand.
Figure 1.3 Popular Brand Index Source: W&S Research Based on the figure 1.3, KFC is the number one top of mind in fast-food fried chicken industry, as Pizza Hut is not considered as a fast-food chain that provide fried chicken, the company will not be suitable for this research. As buyers react positively to them and they are more favored (Gordon & Holyoak, 1983), they frequently progress toward becoming piece of the overall industry pioneers (Veryzer &
Hutchinson, 1998). Based on Indonesia Investment, KFC brand is indonesia’s market leader in term of fast food fried chicken. At the start of 2015 The KFC brand is
Indonesia’s market leader in the fast food chain of restaurants. On 2015, the company had a total of 540 outlets in more than 100 cities across Indonesia (including Jakarta,
Bandung, Semarang, Surabaya, Medan, Makassar and Manado).
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Figure 1.4 Top Brands for Fast Food in Indonesia Source: Majalah Marketing Also based on figure 1.4 in term of fried chicken industry, KFC is on the top in
Inonesia’s most popular fast-food franchise.
1.4.1 Kentucky Fried Chicken Company Profile
KFC remains as the one of the most well-known fast food franchise. Their ability to remain relevant for decades is considered as a great accolades. Nowadays, using the franchising model of doing business, KFC has opened their branch in more than 110 countries with an overall number of units at more than 16,000. As their primary focus is fried chicken, KFC also offers some of other product line in different countries.
(Lichtenberg 2012)
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KFC in Indonesia was established in 1978 by Gelael Group. The Company started its first restaurant operation in October 1979 at Jalan Melawai, Jakarta, and has been successful. The success of this outlet was followed by the opening of further outlets in
Jakarta and the expansion of coverage area to other big cities in Indonesia, among others Bandung, Semarang, Surabaya, Medan, Makassar and Manado. The continued success achieved in brand development has made KFC a fast-franchise business known in Indonesia. The inclusion of Salim Group as a major shareholder has increased the Company's development in 1990, and in 1993 was listed as an issuer on the Jakarta Stock Exchange as a move to further promote its growth . The majority shareholding at present is 79,6% with distribution of 43,8% to PT Gelael Pratama from Gelael Group and 35,8% to PT Megah Eraraharja from Salim Group while minority share (20,4%) is distributed to Public and Cooperative . The Company obtained KFC franchise from Yum! Restaurants International (YRI).
In the first semester of 2017, KFC posted net profit growth up to 75.38% during the first half of the year to Rp 75.75 billion compared to last year Rp 43.19 billion. Based on the company's 6-month financial report for the period ended June 30, 2017 and
2016, the issuer's share with the FAST ticker actually grew only 12.67% from Rp2.31 trillion in the first half of last year to Rp2.6 trillion in the same period of the year this.
The profit of KFC brand holders can grow up to 75.38% because in the first half of the year the company earns income tax benefit of Rp12.19 billion, reversing from last year recorded as expense of Rp14.28 billion (Marketbisnis.com, 2017). As a result, the company's current year profit performance exceeded Rp75.75 billion and leading the market share of fast-food fried chicken industry.
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1.5 Me-too Brand
On the other hand, the competitor of prototypical brand or a follower brand can be defined as me-too brand. (Carpenter and Nakamoto, 1989). With advances in technology, the response of me-too brands to a prototypical brand is faster, allowing them to appear soon after the launch of a prototypical brand (Lowe and Alpert, 2010).
This shortens the phase in which the unique concept in a prototypical brand can expect to reap premium prices and high margins. A me-too brands occurred from the attempt to win market share against prototypical brands (Lowe and Alpert, 2010). For the me-too brands, non-KFC franchise will be used for this research, CFC is one of the example. since a me-too brands occurred from the attempt to win market share against prototypical brands, and CFC will be used in this research. Since it chose the name of CFC where California located as one of the states in the United States, since fast food fried chicken offered by CFC directly perceptible with other ready-to-eat products from U.S.A already popular first. The initial assumption of most people is the same as mentioning that CFC is a franchise company from abroad. Budi
Hamidjaja President Director of PT Pioneerindo Gourmet Tbk admitted from brand name side of the CFC name is very nice and easy familiar to the public especially among young people who at one time had been very crazy about various products and cultural results of westernization. “Jika Amerika Serikat memiliki restoran ayam cepat saji Kentucky Fried Chicken (KFC), maka Indonesia juga memilikinya. California
Fried Chicken (CFC)adalah restoran ayam cepat saji milik Indonesia” (Money.id,
2016). McDonald also used in this research as the competitor of the KFC, even though McDonald use burger as their main product, but in Indonesia it is a different case, in order to win the market share against KFC, McDonald specifically in
Indonesia sells fried chicken as one of their main product (Tirto.id). Richeese Factory
10 is also one of the rival of KFC in recent year, even though their franchise is considered new compared to other me-too brands, Richeese has gain popularity among consumer as a top notch fried chicken industry/
1.5.1 California Fried Chicken (CFC)
California fried chicken franchise in Jakarta was established in 1983. The chain was supplied by the same group of Wendy’s and Kentucky Fried Chicken that is called
Sierad Group. Back in 1983, CFC is one of fifth most popular fast food chain in
Indonesia after KFC and McDonalds. As the westernization that is happening in
Indonesia in 1990s, California Fried Chicken took advantage of the growth then reaching 90 by 1997 (CFC, n.d. According to Adweek (n.d), California Fried Chicken was founded by 3 Indonesian who wanted to bring and introduce the taste of fried chicken, while three of them are attending the univeristy in California.
1.5.2 McDonalds
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McDonald is a fast food company that is founded in 1940 in San Bernardino,
California, United States. It is originally started from hamburger stand. It is starting to expand when the McDonald’s franchise was used in Phoenix, Arizona. In 1955, the company has Ray Kroc as a businessman and franchise agent to expand the
McDonald chain more.
McDonald’s is the world’s largest restaurant chain in terms of revenue, by serving over 69 million customers daily in over 100 countries. The first original and well- known product for McDonald is hamburgers, but nowadays McDonald also sell cheese burgers, fried chicken, french fries, breakfast items, soft drinks, etc in order to keep up with the consumer wants and needs on the fast food restaurant chain market.
Acording to BBC (2012), McDonald is the world’s second largest private employer that has employed for over 1.9 million overseas.
1.5.3 Richeese Factory
Richeese Factory is a fast food restaurant that is selling a fast food fried chicken with its specialty which is having a cheese dip. It is owned by PT. Richeese Kuliner
Inodnesia. It was founded in the shopping center in Bandung named Paris Van Java on 8 February, 2011. It has over 50 franchises in 2016. The unique flavor of Richeese
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Factory is it has its own way of serving the fast food fried chicken. It has a cheese dip and level of spiciness in its fried chicken. Richeese Factory has been adapted with
Indonesian market quite well, because Indonesian is well known for spicy food lovers.
In 2018, Richeese keeps on developing their product to compete in the fast food fried chicken market.
1.6 Problem Statement
Although the statement or information about generation Y is belong in the earlier stage of consumer lifecycle has been informed previously, the cohort doesn’t represent as a homogenous group (Noble, 2009), With the lack of data about generation Y’s purchase intention towards prototypical and me-too brand of fast food chain, with the rapid increase of new fried chicken franchise, the author wanted to study about generation Y’s purchase intentions of prototypical and me-too brands specifically their purchase intention towards fast food fried chicken franchise. Author also wanted to determine whether there is any significant difference of purchase intention between prototypical and me-too brands. What it takes for the fast food chain in order to compete with the traditional food, facing growing competition from
KFC as well as aggressive local rivals, the biggest fast-food chain in Indonesia is relying on a secret weapon to maintain its position.
This research is important because of the lack of valid data and lack of research towards the growth of fast food chain, specifically in Jakarta Indonesia. Research should be made to determine what generation Y purchase intention towards the specific brand, the current study explores the perceptions, purchase motivations and behavioral intentions of university-aged Gen Y consumers when choosing different brands of fast food chain. Specifically, the currently study examines self-confidence,
13 perceived quality, extrinsic attributes and perceived risk as drivers and inhibitors of purchase intentions for their effects on prototypical and me-too brands of fast food chain. As more young people began to earn more money they also began to spend more which is strengtened the trend of spending more time outside their home. Just as the Baby Boomers wanted something fast and easy, the generation Y want something more sustainable and in a place where they can use their various electronic devices.
As more Baby Boomers retire and the generation born in the 21 century enters the workforce we can expect another change, a new type of restaurant that carries on the food service industry.
1.7 Research Questions
RQ 1: Is there any relation of self-confidence to generation Y’s purchase intention towards prototypical and me-too fast-food fried chicken brands?
RQ 2: Is there any relation of perceived quality to generation Y’s purchase intention towards prototypical and me-too fast-food fried chicken brands?
RQ 3: Is there any relation of extrinsic attributes to generation Y’s purchase intention towards prototypical and me-too fast-food fried chicken brands?.
RQ 4: Is there any relation of perceived risk to generation Y’s purchase intention towards prototypical and me-too fast-food fried chicken brands?.
RQ 4a: Is there any relation of financial risk to generation Y’s purchase intention towards prototypical and me-too fast-food fried chicken brand?
RQ 4b: Is there any relation of physical risk to generation Y’s purchase intention towards prototypical and me-too fast-food fried chicken brand?
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RQ 4c: Is there any relation of performance risk to generation Y’s purchase intention towards prototypical and me-too fast-food fried chicken brand?
1.8 Scope of the Research
This research is focused on fast food chain that listed, prototypical brand (KFC) and me-too brand. The respondents of this research are university-aged Gen Y and working-class Gen Y consumers. Since this research is conducted specifically for gen
Y’s purchase intention, the age limitation for this research is between 23 – 40 years of age.
The researcher wants the respondents to have more experience and knowledge in fast food fried chicken product. Therefore, the respondents must have at least consumed a fast food fried chicken within the last 1 month and have to be at least consume fast food fried chicken product more than two times.
The researcher will separate into 2 studies, which is to identify the Prototypical Brand
(KFC) and Me-Too Brand (Non-KFC). As a comparison to identify which fast food fried chicken brand is more popular and consumed in the Indonesian market. In the
Prototypical Brand study, the researcher wants to identify the respondents answer towards the Prototypical Brand in Indonesia, what are the factors that influence KFC to be the top in terms of market share in fast food fried chicken brand in Indonesia.
The researcher also want to identify the respondents answer towards Me-Too Brands, regarding how those brands are able to compete and keep up with the existing fast food fried chicken business in Indonesia
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1.9 Aims and Benefits
There are some benefits that can be achieved by conducting this research on the antencedents of generation Y’s purchase intention towards prototypical and me too brand.
The aims and benefits to be covered in this research are as follow:
- To determine whether self-confidence with brands of customer has significant
impact towards the purchase of prototypical and me-too brands.
- To investigate whether perceived quality of specific fast food franchise has
positive relation between customer’s purchase intentions.
- To investigate whether perceived risk (financial, physical, performance) of
specific fast food franchise has positive relation between customer’s purchase
intentions.
- To investigate whether the extrinsic attributes of specific fast food franchise
has positive relation between customer’s purchase intentions.
The findings derived from the research objectives and benefits stated above would provide benefit for:
- Franchise owner or for someone who wanted to build their own franchise in
the future.
- Second is for the marketing scholar who wanted to do research that related to
fast food
- Lastly for someone who works in fast food industry in order to develop their
strategy
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1.10 Structure
CHAPTER 1 – Introduction
This chapter elaborates the background of the antecedents of customer purchase intention towards prototypical and me-too brands of fast food chain in Indonesia, by providing the information of the history of fast food chain, data analysis from each company, the problem statement related to the issues and why this research should be considered important. Moreover, it consist of the scope and limitation of this research.
In addition, this chapter states the aims and benefits of conducting this research.
CHAPTER 2 – Literature Review
The second chapter will further elaborate the fundamental theory that related to this research; for instances; the variables that affect the customer’s purchase intention towards prototypical and me-too brands of fast food franchise, self-confidence, perceived value, perceived quality, extrinsic attributes, and perceived risk. Each variable will be defined in detail through the provision of findings from previous research. In addition, this chapter will include presentation and explanation of the research model that will be used to develop hypothesis.
CHAPTER 3 – Methodology
The third chapter will further explain the research methodology of this research, which will include the sampling method and criteria of the respondents that are qualified for the survey. In addition, the author will describe the data collection method and the questionnaire development process and the methods to use to test the hypothesis.
CHAPTER 4 – Findings
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This chapter will be done by the time the author has finished the data collection stage.
The data that has been collected will be then analyzed by using IBM Statistic SPSS software in order for the author to jump to conclusion whether or not each of the hypothesis is supported.
CHAPTER 5 – Conclusion and Recommendation
The fifth chapter is the last chapter of the research, it will contain the summary of the research findings. The author is required to find the solution for the problem that initially stated in the first chapter. For the future research, the author will provide the managerial implication, research limitation, and recommendations.
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