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*Views expressed in this report are those of the authors

International Management III

KFC Thailand

Group Assignment

Nandini Bhatia Salome (Man Wing Ma) Alice Jordan Chani Van Der Merwe

Word Count: 4 397

1

Contents Page

Executive Summary

Page 3

Introduction

Page 5

Similarities and Differences

Page 6

Competitors and Current Industry Trends

Page 12

Internal and External Analysis

Page 15

Strengths and Weaknesses

Page 16

Opportunities and Threats

Page 20

Realistic Solutions

Page 25

Conclusion

Page 27

Appendix

Page 29

Reference List

Page 30

2

Executive Summary

This following report analyses the KFC subsidiary in Thailand. KFC is based in the

US with more than 300 franchises in Thailand. While assessing the similarities and

differences in the two cultures, we found that Thailand and the US have very little in

common.

KFC is the third largest fast-food restaurant in the world but it does face a substantial

and growing number of competitors. At present, its main competitors in the fast food

industry are McDonalds and Domino’s Pizza. However, in the future, KFC will face

more competition from full-service restaurants as they are starting to increase in

popularity. Nevertheless, KFC is still a market leader in terms of chicken and has

reputed itself as being one of the most desired places to work in Thailand.

KFC adopts a decentralized regional structure division where managers run operations

according to the country’s culture, political and economic situation. Doing so enables

KFC Thailand more flexibility while still staying within the global guidance of the

parent company. A drawback of this structure is the possibility that communication

flow is not as efficient and ensuring control and consistency of all foreign and local

operations may cause additional expenditures.

KFC Thailand has many opportunities in terms of expansion and penetration into

other target groups not yet exploited. Marketing campaigns that publicizes its

corporate and social responsibility could improve its brand image.

3

Nonetheless, KFC Thailand does face certain threats such as the bird flu condition,

the political instability, the food crisis and potential new competitors. To this, we have

recommended that KFC takes corrective actions such as expanding its menu, offer

financial evidence to support investment decisions in Thailand, and use reminder

advertising to ensure that their business will continue to grow.

4

Introduction

KFC Corporation, based in Kentucky, U.S.A., is run by PepsiCo. PepsiCo.

implements a multibranding strategy which brings KFC, Pizza Hut, Long John

Silver’s, Taco Bell and A&W, All-American Food together under one corporate roof,

called Yum! Restaurants, Inc.

KFC is the world’s largest chicken restaurant chain, owning more than 11,000

restaurants in more than 80 countries. Currently, KFC operates 305 franchises in

Bangkok and 56 upcountry provinces across the nation. By maintaining high quality

food and customer service, KFC is the leader in the quick-service restaurant industry

in Thailand

The aim of this report is to analyse KFC Thailand. In order to understand the cultures

of the U.S. and Thailand, their cultural similarities and differences will be discussed.

Next, KFCs competitors and the current trends will be explored so as to understand

its position in the market. Thirdly, according to KFC Thailands internal capabilities

and external environment, its strengths, weaknesses, opportunities and threats will be

discussed.

Finally,

with

a

view

to

maximizing

KFC

Thailands

competitive

advantages, taking corrective actions towards current problems and proactive actions

towards potential threats, some recommendations will be made.

5

Similarities and Differences between the US and Thailand

The United States of America (US)

The US is the world’s most powerful nation state with a stable economy and plays an

active part in many trading blocks such as NAFTA, APEC, and ASEAN. The US

operates under common law hence contracts are longer as it needs to encompass all

aspects of the business. The country’s population was estimated at 303,824,646

(World Factbook, 2008) and the ethnic groups are as follows:

Ethnic Groups in the US in 2003

0.2% 1.0% 4.2% 12.9%
0.2%
1.0%
4.2%
12.9%

81.7%

whiteEthnic Groups in the US in 2003 0.2% 1.0% 4.2% 12.9% 81.7% black Asian Amerindian &

blackGroups in the US in 2003 0.2% 1.0% 4.2% 12.9% 81.7% white Asian Amerindian & Alaska

Asianin the US in 2003 0.2% 1.0% 4.2% 12.9% 81.7% white black Amerindian & Alaska Native

Amerindian & Alaskain the US in 2003 0.2% 1.0% 4.2% 12.9% 81.7% white black Asian Native native Hawaiian

Native

native Hawaiian &in the US in 2003 0.2% 1.0% 4.2% 12.9% 81.7% white black Asian Amerindian & Alaska

Other Pacific Islander

Source: World Factbook, 2008

The religious make-up of the country is:

Religious Groups in the US in 2007 12.1% 2.5% Protestant 0.6% Roman Catholic 0.7% Mormon
Religious Groups in the US in 2007
12.1%
2.5%
Protestant
0.6%
Roman Catholic
0.7%
Mormon
1.7%
Other Christian
4.0%
1.6%
Jewsih
1.7%
Buddhist
Muslim
51.3%
Other of Unspecified
23.9%
Unaffiliated
None

6

Thailand

Located in South-East Asia, the country’s population was estimated at 65,493,298

(World Factbook, 2008). Unlike the US, Thailand operates under a civil law meaning

contracts would be shorter. Thailand is in fewer trading blocks but it is in the APEC

and ASEAN like the US. The country only has three main ethnic groups and the

distribution is shown below:

Ethic Groups in Thailand in 2000

11%

14% 75%
14%
75%

ThaiEthic Groups in Thailand in 2000 11% 14% 75% Chinese Other

ChineseEthic Groups in Thailand in 2000 11% 14% 75% Thai Other

OtherEthic Groups in Thailand in 2000 11% 14% 75% Thai Chinese

The religious make-up for Thailand is also less diverse compared to the US with the

main groups being:

Religious Groups in Thailand in 2000

0.7% 4.6% 0.1%
0.7%
4.6%
0.1%

94.6%

BuddhistReligious Groups in Thailand in 2000 0.7% 4.6% 0.1% 94.6% Muslim Christian Other

MuslimReligious Groups in Thailand in 2000 0.7% 4.6% 0.1% 94.6% Buddhist Christian Other

ChristianReligious Groups in Thailand in 2000 0.7% 4.6% 0.1% 94.6% Buddhist Muslim Other

OtherReligious Groups in Thailand in 2000 0.7% 4.6% 0.1% 94.6% Buddhist Muslim Christian

7

Comparisons in cultures of the home country (the US) and the host country (Thailand)

are outlined using Hofstede’s dimension.

 

Power

Uncertainty

Masculinity

Individualism

Long-term

Distance

Avoidance

Orientation

US

40

46

62

91

29

Thailand

64

64

20

34

56

World

55

43

50

64

45

Average

Avoidance

Individualism

Masculinity

Orientation

Power Distance

Uncertainty

Long-term

Hofstede's Cultural Dimensions for the US and Thailand

100 90 80 70 60 50 40 30 20 10 0 Rating
100
90
80
70
60
50
40
30
20
10
0
Rating

Hofstede's Cultural Dimension

USand Thailand 100 90 80 70 60 50 40 30 20 10 0 Rating Hofstede's Cultural

Thailandthe US and Thailand 100 90 80 70 60 50 40 30 20 10 0 Rating

World Averagefor the US and Thailand 100 90 80 70 60 50 40 30 20 10 0

8

Power distance

The US is a low power-distance culture whereas Thailand is a high power distance

culture. The US therefore favours a decentralized organizational structure where

authority could be questioned and challenged while Thailand respects their authority

and

prefers

a

centralized

organizational

structure.

Thailand

would

have

a

contextualized

communicating style

where titles

and

positions

are

given great

importance as supposed to the US who would focus on personal communicating style.

Due to this, the KFC subsidiary in Thailand has a bureaucratic system and there is

little communication between top managers and the subordinates. The decision-

making process would be top-down, without upward communication. Moreover,

Thailand’s high power distant culture reflects its monarchy system while the low

score for the US reflects its democratic system.

Uncertainty Avoidance

Both Thailand and the US have a high uncertainty avoidance score meaning that they

are risk averse. However, the extent to which the US is threatened by ambiguous

situations and tries to avoid it is lower compared to Thailand where people like

feeling secured. This implies that they are loyal to their jobs and companies.

Managers in Thailand would avoid making risky decisions. It is therefore expected

that Thailand employees work better with a formal procedure where they are dictated

what to do and how to do it. In comparison, The US may find that its employees work

better with an informal procedure with less written rules and guidance. Furthermore,

this dimension can reflect the communication style used in the two cultures. The US

(low uncertainty avoidance), would communicate directly, and pay little attention to

body language, and indirect cues. On the other hand, Thailand, a culture with higher

9

uncertainty avoidance might use body language, succinct words and rely on silence to

convey meaning (Zhao, 2000).

Masculinity

The US has a masculine culture where people strive for achievement, wealth and

challenge, making them very competitive in the workplace. The organizational culture

in the US is therefore an incubator as they are fulfilment oriented. Thailand, however,

has a very low masculinity culture that treasures cooperation within the workforce, a

quality life and a friendly atmosphere. Thailand’s organizational culture is that of a

family where an authority is respected like a parent figure.

Individualism/Collectivism

The cultures of Thailand and the US differ most in this dimension. The US favours

individualism where people care for themselves and immediate friends and family.

They prefer individual rewards based on their performance. Thailand’s culture,

however, is one that focuses more on group work and prefers rewards to be based on

the group’s performance or seniority. Due to this, the reward and motivation system

in the two countries will be different. Also Thai employees would communicate using

affective style where emphasis is placed on non-verbal cues such as tone while the US

culture is one that has an instrumental communicating style where the encoder ensures

that the message sent is clear to the receiver.

Long-term/Short-term Orientation

The US Buddhist and Chinese community is less than that of Thailand hence making

Thailand one of the Confucius cultured country that gives importance to long-term

10

orientation (Spring, 2000). On the other hand, the US is well below the world average

signifying its culture as one that is short-term oriented. Due to this, motivations,

training and policy development would be different in both countries as Thailand

would be looking for long-term promotion while the US employees would focus on

quick bonuses.

Trompenaars’ cultural dimension could also be used to assess the similarities and

differences in the two cultures. The US believes in the idea of a universal way of

doing business whereas Thailand is a particularistic culture that relies on networks

and personal relationships. Individualism is popular in the US whereas in Thailand,

belonging to a group or a community is more important. In terms of displaying their

emotion, Thai’s are usually more neutral and hold their emotions in while people from

the US express their emotions more freely and openly. Moreover, the US culture is a

specific one where work and private life is separated while in Thailand, long-term

relationships are built by diffusing work and personal life. Furthermore, status in the

two cultures is accorded differently: in the US based on achievement and in Thailand

on ascription or connections. One dimension that is shared by both cultures is the

sequential approach where businesses operate according to set plans within a time

frame. However, they differ in the environment dimension as the US adopts an inner-

direct belief where they think they control outcomes while in Thailand; people believe

there is an outer force that shapes their future.

Due to the differences in both cultures, it is important for the KFC subsidiary in

Thailand to operate differently from the one in the US, despite it being a franchise.

11

Competitors and Current Industry Trends.

KFC is the third largest fast food chain in the world, with approximately 55% of its

restaurants in the United States and the remainder in the international market. Of the

worldwide chicken chain shares, KFC which is now owned by PepsiCo and has

55.2% market share, followed by Popeye’s with a market share of 12.7%. The

chicken chain market comes in fifth in sales within the fast food industry. Fast food is

still a growing industry however has slowed recently because fast food markets, such

as the United States market is becoming saturated. The industry is however still

experiencing a growth of 5.4% however this has been overshadowed by the full

service dining industry which is growing at a rate of 7% in the same period, showing

a reversal of trends that were observed in the mid-1990s. However, KFC has had a

decline in its market share over the last 10 years of 15%. (Hoover, 2008)

Over the years, in the highly competitive market of fast foods, KFC has established

itself as one of the market leaders, and this success can be attributed to a variety of

factors. Firstly KFC has developed a unique culture, centred around its origins and the

eleven secret herbs and spices used in the recipe creating a unique and attractive

concept. It is also extremely difficult for competitors to now enter the market as it

nearly reached full saturation levels.

Not being as established as companies such as

KFC, new competitors strive to tap into the price sensitive fast food market however

lacks the bargaining power needed to reduce costs which lead many to exit or even

declare bankruptcy. In addition to KFC follows a franchise model meaning that

restaurants are owned by local entrepreneurs. This has been a very successful model

because it overcomes barriers such as language, law and culture. They have therefore

adopted a multi-domestic strategy of choice. (CSG, 2008)

12

However KFC has also experiences its share of weaknesses and threats. It is not

known for its radical changes in menu and is slow to develop new products to suit the

ever changing fast food market. One of its main criticisms was the amount of fat that

is used in KFC’s food. For this reason, Kentucky Fried Chicken officially changed its

name to KFC in the late 90’s however their menu has changed little. (Hoover, 2008)

One of its main competitors, McDonalds has been quick to respond to new social

expectations and public pressures, redeveloping their menu completely to offer choice

to their customers. KFC followed with a chicken sandwich however this proved not to

be successful and was quickly removed from the menu. In addition to this, KFC uses

Genetically Modified chicken and this has caused many ethical concerns around the

world. McDonalds in juxtaposition has been undertaking advertising to promote the

locality and health of the meat it uses and its social responsibility to the environment.

(Thailand Life, 2008)

The main competitors of KFC are those companies that have been well established

and

have

been

proven

successful.

As

mentioned

before

these

would

include

competitors Domino’s pizza and also McDonalds who poses the bigger threat,

particularly in the United States. However the market share of each of these three

competitors is quite different in the host country (Thailand) which we have chosen to

focus on.

In this culture, chicken is the preferable dish and therefore KFC has gained a larger

market share over its competitors such as McDonalds whose food primarily consists

of beef. In addition, because the restaurants are locally owned, KFC has been able to

adapt and create dishes unique to Thailand to suit its residents taste, incorporating the

local culture, language and politics. This has been the key to their success in the

13

international market and of all their restaurants 69% is now part of a franchise model.

(Hoover, 2008)

14

Internal and External Analysis

An internal and external factor analysis is crucial in determining a company’s

international competitiveness and strategies. According to Porter’s SWOT-positioning

framework, internal factors depend on company’s internal capabilities (strengths and

weaknesses),

and

external

factors

depend

on

the

attractiveness

of

external

environment (opportunities and threats) (Rugman and Verbeke, 1993).

(opportunities and threats) (Rugman and Verbeke, 1993). Source: Rugman and Verbeke, 1993 Figure 1: - Porter’s

Source: Rugman and Verbeke, 1993

Figure 1: - Porter’s SWOT-positioning of competitiveness determinants shows that

KFC Thailand is placed in Cell 2. This means KFC Thailand has to improve its

structure or create new strategies to withstand external threats while maintaining

existing strengths.

15

Structure

Stregthes and Weaknesses

KFC uses a regional structure. The purpose of this structure is that regional heads

need to account for specific regions in terms of production and marketing, and

reporting to their CEO at headquarters directly (Rodrigues, 1996).

As

shown

in

the

diagram

below,

American,

European,

Asian

and

Australian

subsidiaries report to the headquarters in the US. Different countries are under the

four regions. Each of these countries has separate departments such as production,

marketing.

KFC CEO Production Marketing Finance HRM Americas Europe Asia Australia Thailand Production Marketing Finance
KFC CEO
Production
Marketing
Finance
HRM
Americas
Europe
Asia
Australia
Thailand
Production
Marketing
Finance
HRM

Strengths

By using a regional structure, authority and responsibility can be decentralized to the

regional office (Rodrigues, 1996) hence; responding to changes is faster because KFC

16

management has the knowledge about local conditions. In response to a 12-month

market survey conducted by Nielsen Media Research in 2002, KFC found that

customers have negative comments on ambience and service area; therefore, KFC

took a three-year repositioning approach including wide refurbishment to its 300

outlets (Mulchand, 2002).

Moreover, this structure allows KFC Thailand to adopt a multi-domestic strategy.

Operated by local entrepreneurs, they hold an understanding of local language,

culture, customs, law, and marketing characteristics (eCheat, 2007). Yum! believed

that basing the Thai subsidiary on the US model is not a superior strategy to become a

successful global firm; instead, they should adapt to local tastes, and consider cultural

changes and political climates simultaneously (O'Keefe, 2001). For example, fresh

rice (O'Keefe, 2001) and spicier chicken (Tanzer, 1993). Moreover, KFC Thailand

even customizes their own slogan—‘The Spice in your Life’ which implies happiness

is not only from food but also from the overall service experience (Mulchand, 2002).

Being

a

single

management

unit

under

this

structure,

regional

managers

can

concentrate on developing local expertise (Rodrigues, 1996). Pertinent to a study

conducted in 2005 by Hewitt Associates, SASIN Institute and Bangkok Post, Yum

Restaurants Thailand was awarded Number One Best Employer in Thailand and

Outstanding in Asia as a result of strong commitment to personnel development like

training, courses, and awards (KFC, 2008).

Weaknesses

17

Given the fact that KFC Thailand and KFC America have geographical distance and

dissimilar environments, misunderstanding may be a problem. For this reason,

communication costs will be high and additional expenditures will arise such as high

volume of accounting and control information (Rugman and Verbeke, 2003).

To ensure that the structure does operate efficiently, the parent company should also

consider the factors of host country’s relative sales other than the impact of

geographical

diversification

when

evaluating

host

country’s

profit

performance

(Rugman and Verbeke, 2004). Yet, some corporate executives of PepsiCo possess

financial or marketing backgrounds but have no restaurant operations experience (Van

Warner, 1994). In other words, the profit performance of subsidiaries may well be

distorted.

Operations

Strengths

By achieving economies of scale, KFC Thailand can keep the production cost low.

Chicken, KFC’s main ingredient, is much cheaper and more widely available in Asia's

developing countries than beef (Tanzer, 1993). Additionally, their labour cost can be

lower than their principal competitors. This is due to favourable working conditions

leading to employee retention. (Datamonitor, 2007) (Robbins, Millett and Waters-

Marsh, 2004). This competitive advantage allows KFC Thailand to occupy 49%

market share (KFC, 2008).

Furthermore, KFC Thailand fulfils the corporate social responsibility by applying the

idea of Carroll’s three-dimensional model (Appendix). Carroll’s suggests that there is

a

relationship

among

the

social

issues

involved,

the

categories

of

social

 

18

responsibilities, and the four levels of the philosophy of responsiveness (Deresky,

2002). In fact, all chicken that KFC Thailand uses are from domestic suppliers

adopting animal welfare standards based on those set by the EU (KFC, 2008). The

chicken is cooked ina manner approved by the Ministry of Health and the World

Health Organization (KFC, 2008). Consequently, in accordance with Carroll’s model,

KFC Thailand, with an accommodation philosophy towards the social issue of

consumerism, meets its ethical responsibilities.

Weaknesses

In Thailand, all meats are consumed but KFC, focusing only on chicken have not been

able to exploit the meat eating consumer market to its full potential.

KFC Thailand is currently facing the danger of the growing trend of full-service

dining industry. Provided KFC Thailand continues to operate by this model, its

competitive

advantage

will

be

weakened

due

to

competition

from

full-service

restaurants.

 

19

Opportunities and Threats

Opportunities

Even after six years of expansion in Thailand KFC can still do more. In 2001

(Bangkok Post, 2001) and 2007 Yum announced room for expansion, intending to

double the size of its business in Thailand over the next five years, increasing KFC

franchises from 313 to 600 (Rungfapaisarn, 2007). It is important that KFC continues

to expand, making the most of the market, keeping the jobs local and the business

locally oriented.

KFC’s target market of youth has a lot of potential in Thailand but can still be

improved. Thailand’s population reached 63.36mil at the end of 2003. 25% of this

population is under the age of 15years (Thailand Investor Service Centre, 2001).

Presently KFC Thailand is targeted more towards young children. It would be greatly

beneficial to increase customers from the age group of 13-20 such as high school and

university students to increase sales.

KFC can also expand the services offered by their franchises. In 2002, KFC

announced the plan to shift their image from takeaway to fast casual dine in restaurant

(Suwanprakarn, 2002). During this expansion Yum Restaurants has begun to group

their restaurants including KFC, Taco Bell, Pizza Hut, Long John Silver’s and A&W

All-American Food (Jobsdp) This will allow customers a greater choice from the one

location while generating a greater customer pool. This is attractive for both families

and teens with differing preferences.

20

In a fast changing world dominated by technology, consumers demand more for less.

KFC Thailand has a home delivery service but does not have an online order system.

This could be an opportunity for KFC to capture consumers who use internet

frequently.

In March this year, KFC launched a non-fried chicken menu in Thailand (Retailnu,

2008). Introducing healthy options to the menu at KFC would not only help keep

mothers bringing their young children but also attract health conscious teens and

adults. As in Australia, Thai people’s demand for healthy food options is increasing. It

is important for KFC to make this move to healthier options successful or they will

lose health conscious customers to other fast food chains with a healthier image.

Traditional Thai fast food is much healthier than western fast food such as KFC

(Babcock, 2002).

Showing its consumers how the product is being made would emphasise these healthy

changes. Television advertisements showing how the chicken is cooked and the

ingredients used would inspire confidence in the product and help consumers feel that

they have made informed decisions.

Another current social responsibility issue is the environment. McDonalds has taken

the stance of environmental care (McDonalds in-store pamphlet, 2008) while KFC has

taken the care of animals under its wing (KFC Animal Welfare Program, 2008). KFC

is yet to really highlight to the public in Thailand and the rest of the world its concern

for the welfare of animals. Being seen as socially aware and responsible will improve

KFC’s public image and help to differentiate them from competition.

21

Threats

The bird flu that infected Asian countries is still an issue in Thailand particularly for a

restaurant like KFC. A pandemic that has caused so much social and political interest

is not easily forgotten, not to mention dangerous.

The American Centre for Disease Control and Prevention stated that not only is the

bird flu not likely to diminish in the near future it has also infected one Thai person

(Centre for Disease Control and Prevention, 2007). This may not seem much but it

does prove that the virus can be transmitted to humans and thus most of the

population is likely to avoid chicken if another outbreak is to occur. Although Yum

Restaurants has stated that they believe sales will not decline in the event of another

outbreak, (Franchise Chat, 2004) the statement seems unrealistically hopeful.

Being such a popular and widespread brand name, KFC probably will always face

some public criticism. Like other fast food restaurants, the source and quality of the

food is consistently being questioned. One critic claimed that KFC was genetically

modifying its chicken resulting in beakless and feetless chickens (Hsu, 2000). Such

reports can make consumers think twice about purchasing the product or even choose

another brand.

The political situation in Thailand has been and continues to be very unstable. With a

coup as recent as September 2006 there is a split between the people of Thailand,

those for and those against former Prime Minister Thaksin Shinawatra (Economist,

2008). Such instability affects peoples’ confidence and feeling of security in their

country. They are more likely to save and less likely to invest. In this situation, fast

22

food is likely to become a luxury. Political instability may also decrease the tourists

visiting Thailand. KFC is a popular choice with tourists due to its familiarity and in

this situation KFC will lose these customers.

The

fast

food

industry

has

an

increasing

number

of

players.

One

particular

competitive advantage that another brand may have over KFC is a healthier image,

menu and cooking method. Given the rise in health conscious consumers this may

take customers away from KFC. For example, Subway sandwich bar is already well

established in Thailand and is perceived as a healthier eating option than KFC.

The most recent of KFC’s threats and probably the most concerning is the food crisis

in Asia, particularly concerning rice. On May 7 th the Sydney Morning Herald (2008)

reported that because of the food crisis and the dramatic increase in food prices,

Thailand had to drop its exporting prices for rice and forget plans to impose a rice

cartel, which would fix the price. Being the world’s biggest rice exporter, the drastic

drops in rice prices are likely to cause economic uncertainty in Thailand. Again fast

food will begin to be seen as a luxury. People will start to save more money and

consume local Thai food that is half the price of a burger meal at KFC.

23

Realistic Solutions

In order to make the most of their opportunities and the best of their business, KFC

needs to be aware of their threats and deal with them accordingly.

Bird flu

If the bird flu was to return to Thailand, KFC needs to keep its consumers feeling

confident about the product. Introducing new menu items including beef, pork and

vegetarian options would allow customers to avoid chicken altogether. In order to

keep profits high it would be necessary to keep chicken dishes on the menu and

ensure sales. Currently KFC uses Thai chicken from domestic suppliers. It would help

to import chickens from countries where bird flu is not an issue and in a way that the

chickens will not be contaminated. Informing the Thai public as to where the chickens

come from, how they are prepared and how they are cooked would encourage

confidence in the product.

Political instability

The effects of political instability on KFC can be minimised by remaining politically

neutral. By doing this, KFC loses none of its customers based on political opinion.

Emphasising the fact that the franchises are owned and run by Thai people will keep a

feeling of familiarity and togetherness between customers and the business.

Despite the political instability, economic projections remain positive with expected

increase in private consumption and investment (Economist Intelligence Unit, 2008).

This may mean KFC has nothing to worry about but it is important they be aware of

the political environment.

24

As the economy may suffer, keeping KFC affordable is an important part of keeping

customers. Along with consumption, investment is likely to decrease. It is important

that KFC reassures investors with financial reports and managerial reports that

emphasises the stability and success of the business.

Bad Publicity

Bad publicity is a problem for many brands that are so prominent in the public eye

and cannot be eliminated. However, in response, could spend more money on

marketing that gives a positive image of the company, concentrating on any current

issues the brand is having. Generating good word of mouth about both the brand and

the product will help keep a positive brand image in the minds of consumers. It would

help to ensure that all customers’ experiences at KFC are positive and

meet

expectations. Due to this Total Quality Management is advisable. This will help to

assure that the quality of the product and level of service is at its level best and that

there is a good communication flow both within the business and externally to its

consumers.

Potential new competition

In order to keep new and existing competition at bay, it is important that KFC

maintain their prominence in the minds of consumers. It would be beneficial to

undertake

a

Reminding

Strategy

for

advertising.

This

involves

KFC

allowing

customers to evaluate their experiences during and after their visit to KFC by

portraying that experience in an advertisement. This advertising would need to

emphasise the competitive advantage of KFC.

25

Sponsorship of events or teams that are popular with the youth target market will aid

this strategy. It is important that KFC always be locally responsive 1 in order to meet

the needs of their target market.

Food Crisis

Thailand has already reacted to the food crisis by dropping rice exporting prices

which will help reduce the global effect. At some point in time KFC may need to

import rice. It may become impossible for KFC to serve rice and this may mean they

need to introduce an alternative carbohydrate component of their meals. KFC can

only keep their prices fair, remain politically neutral and keep a careful eye on their

costs.

26

Conclusion

KFC is sustaining its leadership position in the chicken restaurant chain, while there is

room for expansion and differentiation in Thailand.

By adopting regional structure, decentralized authority allows KFC Thailand to be

more flexible and adaptative. However, due to cultural differences between the U.S.

and Thailand, geographical distance and corporate executives without restaurant

operations experience, these lead to enhance communication costs and inaccurately

evaluate subsidiariesprofit performance.

Although being the leader in the fast food chain in the world becomes a strength for

KFC, weaknesses still exist due to lack of diversification on the menu choice,

growing demand for full-service dining restaurants and increasing health

consciousness. Yet, provided KFC can introduce more healthy options to the menu by

promoting through television and sponsorship, change its image from quick-service

restaurants to fast casual dine in restaurants, continue to expand by franchising, this

will not only enlarge its target audiences but also increase its growth potential.

Given that some uncontrollable factors influence KFCs image or performance, KFC

should deal with these carefully. In case bird flu outbreaks again, KFC can diversify

its menu by the use of beef and pork. When facing bad publicity, KFC can augment

its social responsibility regarding animal welfare and generate a positive brand image.

Moreover, encountered by unstable political situation and food crisis, remaining

27

politically neutral and keeping an eye on production cost and price respectively are

beneficial for KFC.

With continuous improvement and maintaining the competitive advantages, KFC can

endure its strong position in the fast food chain in spite of keen competitors.

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APPENDIX Carroll’s Model

APPENDIX Carroll’s Model 29

29

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