Kentucky Fried Chicken - Kfc

Kentucky Fried Chicken

I: Background of the Company

Kentucky Fried Chicken was the largest chicken restaurant chain that markets internationally in late 1960’s. The KFC seek franchises for expansion of the business through the Colonel Sanders Recipe. In 1954 Colonel reached the old age aand decided to sell the business to two potential buyers which are Jack Massey and John Young Brown Jr. and concentrate in public relations wherein they focused on franchising and in international market.

 Then they entered in a joint venture in Mitsuoishi Shoji Kaishi, Ltd. in Japan given the rights to operate 14 existing KFC franchises. In 1971, KFC discussed a possible merger in Heublin, Inc. Several months later, Heublin acquired KFC. However Heublin has little experience in restaurant business that cause conflicts between him and Colonel Sanders. Heublin took a move by setting new management team to redirect KFC’s strategy, the “back-to-the-basics”. In 1982 R. J Reynolds Industries, Inc (RJR) merged in Heublin into wholly owned subsidiary. RJR left KFC management largely intact believing KFC managers were better qualified in operations. Later on R. J Reynolds Industries, Inc (RJR) sold KFC to PepsiCo, Inc. PepsiCo, Inc. embarked aggressive acquisition of companies in unrelated major businesses that failed to live up expectations because management skills lay outside of PepsiCo’s area of expertise and lead them to restructure its operations. PepsiCo undertook sweeping changes; it includes franchise contract and reducing staff to give more control over its operation. The company strategy diversified in three distinct but related markets-soft drinks, snack foods, and fast food restaurants.

In 1993, KFC introduced its own rotisserie chicken, called Rotisserie Gold, to combat Boston Market. However, it quickly learned that its customer base was considerably different from that of Boston Market’s. KFC’s customers liked KFC chicken despite the fact that it was fried. In addition, customers did not respond well to the concept of buying whole chicken for take-out. They preferred instead to buy chicken by the piece. KFC withdrew its rotisserie chicken in 1996 and introduced a new line of roasted chicken called Tender Roast, which could be sold by the piece and mixed with its Original Recipe and Extra Crispy Chicken. Many of KFC’s problems during the late 1980’s surrounded its limited menu and inability to quickly bring new products to market. The popularity of its Original Recipe Chicken allowed KFC to expand without significant competition from other chicken competitors through the 1980’s. As a result, new product introductions were never an important element of KFC’s overall strategy. One of the most serious setbacks suffered by KFC came in 1989 as KFC prepared to add a chicken Sandwich to its menu. While KFC was still experimenting with its chicken sandwich, McDonald’s test marketed it McChicken sandwich in the Louisville market. Shortly thereafter, it rolled out the McChicken sandwich nationally. By beating KFC to the market, McDonald’s was able to develop strong consumer awareness for its sandwich. This significantly increased KFC’s cost of developing awareness of its own sandwich, which KFC introduced several months later. KFC eventually withdrew its sandwich because of low sales.