THE EXTERNAL ENVIRONMENT AFFECTING KFC

1.0 External Analysis

For success within the airline industry, an awareness of the external environment is essential. This section aims to highlight the position of the industry, in particular looking at competitors and assessing KFCs capability to meet current and future challenges.

1.1 PESTEL Analysis

An analysis of the macro-environment has been carried out using PESTEL

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 there 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%. Foreign direct investment rose in the fiscal year ended March 31 2007 to about $16 billion from just $5.5 billion a year earlier. So taking into considerations the economic factors of U.K KFC is safe.

SOCIO CULTURAL:
The social trend toward fast good consumption is changing and U.K 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 U.K.

TECHNOLOGICAL:
The technological knowhow and expertise will also enter the U.K 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 Dominos 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 cows ranch. Large-scale plantation has effect the environment and lots of green forest opening for plantation activities. Vegetarian environmentalist criticizes the fastfood 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.

2.1 SWOT Analysis

It is important that strategic development is reflective of KFCs strengths and weaknesses relative to competitors and the opportunities and threats presented by its external environment

Beneficial STRENGTHS 1. Purchase power of consumer is rising. Internal 2. More than half of Salvadorans income is spent on food. 3. Recognized worldwide brand name (15,000 world-wide locations. 4. Quality and freshness regulated throughout every franchise. 5. Offers choices of local food on menu. OPPORTUNITIES 1. Online Sales assist profits. 2. Introduction of new products. External 3. Expansion due to rising economy (Continual Growth) 4. Only current location in capital city San Salvador largest hub for travelers.

Harmful WEAKNESSES 1. Frachise cost is high. 2. Competition is high in the industry. 3. Small country population.

THREATS 1. Foreign products are currently fashionable but interest could decrease. 2. Economic climate stability. 3. Local suppliers are minimal. 4. Pollo Campero is a Salvadorian brand and well established chicken eatery. 4. Many fast food competitors such as Burger King, McDonalds, Pizza Hut, etc.