A2267694 Marcy A2267503 Baachka A2267716 Cindy A2267066 Jennifer A2267252 Yvette INTERVIEW CHAPTER 2 & 3: KENTUCKY FRIED CHICKEN KFC introduction KFC (Kentucky Fried Chicken) is a fast food restaurant chain. This company headquartered in Louisville, Kentucky, in U.S. The company is a subsidiary of Yum! Brands(百勝集團), a restaurant company that also owns the Pizza Hut and Taco Bell chains. The founder was Harland Sanders. It’s the world’s second largest restaurant chain (as measured by sales) after McDonald’s with 18,875 outlets in 118 countries and territories as in 2013. KFC was founded Colonel by Harland Sanders (born on Sep 9, 1890) who began sell fried chicken from his roadside restaurant in Corbin, Kentucky during Great Depression. He identified the potential of the restaurant franchising concept and the first “Kentucky Fried Chicken” franchise opened in Utah in 1952. KFC popularized in the fast food industry, diversifying the market by challenging the established dominance of the hamburger. By branding himself as “Colonel Sanders”, Harland became a prominent figure of American cultural history, and his image remains widely used in KFC advertising. However, Harland sold the company to a group of investors led by John Y. Brown and Jack C. Massey in 1964. KFC was one of the first fast food chains to expand internationally. In the mid of 1960s, KFC opened outlets in Canada, the U.K, Mexico and Jamaica. Throughout the 1970s and 1980s, KFC went through a series of changes in corporate ownership with little or no experience in the restaurant business. In the early 1970s, KFC was sold to the spirits distributor Heublein who were taken over by the R.J Reynolds food and tobacco conglomerate, who sold the chain to PepsiCo. The chain continued to expand overseas. However, in 1987 became the first Western restaurant chain to open in China, which is now the company's single largest market. PepsiCo spun off its restaurants division as Tricon Global Restaurants, which later changed its name to Yum! Brands. Yum! Brands company owns 4491 stores in U.S, 4563sores in China and 9821 stores across the rest of countries. They totally own the 18875 outlets in 118 countries in 2013. Their average annual sales per unit is 1.2 million. In 2014, they already had more than 41000 restaurants in over 125 countries and global sales totaled more than US$ 13 billion. Question 1: What is the competitive implication that KFC faces in its industry? What is price war? The implications for a price war are intense rivalry between interdependent companies which occurs when one company makes a move and the others react. this rivalry continues to increase as each company tries to undercut the others price and offer more valuable products, finally resulting in decreased industry profits. What are the implications of price wars for KFC? According to the definition of price wars, there must be a competitor to compete with KFC. Once, the rivalry of a company such as MCdonalds and KFC starts, KFC focuses more on differentiating, launching new fast food product, and marketing efforts to raise sales than bitter price wars and advertising battles, while the other company is trying price cuts. but on the whole rivalry in the industry remains moderate due to the existence of numerous players operating in various sizes. How KFC deals with the threat of price wars? The most common way to try and deal with the threat of a price war by seeking to consolidate the industry following the price of the dominant company, however, price-fixing and collusion needs to be avoided (the idea cannot be communicated between companies). it is not very difficult to enter the fast food industry, but it is extremely difficult to enter as KFC’s competitor. So, for KFC, they overcome this by differentiating its products, effective marketing and branding efforts. In this way, KFC escapes from potential price wars. On the other hand, KFC may want to reduce its cost so that it will survive in case of price wars. Question 2: What are opportunities and threats that kfc has within the industry? Risk of Entry by Potential Competitors In fast food industry, MacDonald ranked as the most favorite food in Taiwan, and follow by MOS BURGER and KFC. MacDonald that has been developed since 1980 has become a closet rival of KFC. Operate a fast food store must to investment requirements of equipment, and it is not difficult to reach, so it is easy to invest Bargaining power of buyers Operation business in order to create the requirement of customer, and the price and the quality inference consumer decision making.KFC use the combining promotion, decrease their price, and give a discount of their product to their consumer. The buyer power of KFC is high when this is proved that the consumers able to influence the price when they have many choices, so it presents high bargaining power of customer. Bargaining power of suppliers These are a lot of suppliers available for KFC’s raw materials.KFC can easily switch their supplier to another supplier since the materials need in the process of producing KFC is easy to get such as chicken.In 2004, KFC has some internal problems and issue regarding of their raw chicken supplier.KFC’s supplier was found doing something horrible when slaughtering the chicken. KFC decided to terminate the contract between them and thus find the new supplier to replace them.So ,chicken supplier can’t easily increase the price for chicken since their supplier power is low. THREAT OF SUBSTITUTES Including today’s emerging industry, like bakery, Chinese fast food…. .They are enough to achieve consumers needed. There are all the substitutes, and they can replace KFC. Power of complement providers Complementors-companies that sell products that add value to other product.Like PEPSI is strong complementors, if KFC revenue is decrease, PEPSI’s cola will decrease. Question 3: How does KFC transform inputs into outputs that customers value? Value Chain The idea that a company is a chain of activities that transforms inputs into outputs that customers value Primary activities The primary activities is activities related to the design, creation, and delivery of the product, its marketing, and its support and after-sales service. Research and Development The design of products and production processes. R & D can increase the functionality of products, making them more attractive to customers. R & D function can help to lower costs or raise the utility of a product and permit a company to charge higher prices. R & D KFC The packaging material and carton design are all recycled paper , environmental concerns and litter. Almost all of KFC packaging are labeling by their logo or name. Production The creation process of a good or service. The production function of a company helps to lower its cost structure. The production function can also perform its activities in a way that is consistent with high product quality, which leads to differentiation (and higher value) and lower costs Product of KFC The product that KFC sells are Egg bacon chesse burger, chicken nugget, chicken burger, Fried Fries, etc. The different products that they sell than other product are Chicken buckets (This chicken buckets have 5 chicken in one bucket), they also sell an egg tart, and mexican salsa king roll( 墨 西 哥 莎 莎 霸 王 捲 ), popcorn chicken, American BBQ sauce smoked chicken(美式 BBQ 醬烤煙燻雞) Marketing and Sales The function is to help a company to create value. Through brand positioning and advertising Marketing and sales can also create value by discovering customer needs and communicating them back to the R & D function of the company. Marketing and Sales of KFC KFC provides a family package like 6, 8 or 10 chicken with additional meal. (If you choose the family package with 6 chicken you can get 2 additional meal, if you choose with 8 chicken you can get 3 additional meal, and if you choose with 10 chicken you can get 5 additional meal.) For the additional meal you can choose whether you want drinks, chicken nugget, salad, soup, fried fries, or corn. KFC not only provide the family package but also another package like two burger with two drinks. The package usually will more cheaper. KFC advertising is simple and easy to understand, because they want the customer know what they are promote about. Customer Service Customer service can create superior utility by solving customer problems and supporting customer after they have purchased the product. Customer Service of KFC KFC provides delivery service KFC also provides a clean place for the customer to eat. Support Activities Activities of the value chain that provide inputs that allow the primary activities to take Materials Management Definition: Controls the transmission of physical materials through the value chain Through production and into distribution KFC: Buys products in bulk to control purchasing costs and supply line from suppliers Regularly reviews delivery, quality and cost from their suppliers to increase efficiency and streamline the process of the procurement Directly linked with their franchise and receives orders for supply of raw material Can place orders through information system or by phone Human Resources Definition : Ensures that the company has the right combination of skilled people to perform its value creation activities efficiently Ensures that people are adequately trained, motivated and compensated to perform their value creation tasks KFC: KFC recruiting procedure is easy and they have online systems, where they have all available vacancies by post, location or area. Training includes: +Workbooks +Quizzes +On – the – job Employees work together as a team KFC does their best to make the job interesting and exciting for workers Information Systems Definition : The electronic systems for managing inventory, tracking sales, pricing products, selling products, dealing with customer service inquires and so on.