KFC in China: Overview, SWOT Analysis, and Financial Position

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Table of Contents

Introduction
Company Overview
SWOT Analysis
Financial Status
Conclusion
References

Introduction

Nowadays, fast food hotels are trendy among customers, making numerous fast-food establishments attempt to meet market demands as customers want a quick and straightforward meal. Given various fast food places in the global marketplace, fast food firms must compete for customers by offering quality and affordable prices that ensure customer satisfaction (Uddin, 2019). It is not enough to provide clients with a convenient and simple way to dine to remain competitive. This essay analyses KFC in China, including its overview, SWOT analysis, and financial position. Business analysis is critical for any organization since it aids in identifying all hazards and concerns, implementing appropriate remedies, and ongoing monitoring of the outcomes depending on the information collected.

Company Overview

Utah, Colonel Harland initiated “Kentucky Fried Chicken” in Salt Lake City in 1952, a fast-food fried chicken eatery credited with helping to differentiate the fast-food business by stimulating hamburger dominance. Due to the company’s enormous success, Colonel Sanders traded KFC to investors in 1964 (McFadden et al., 2022). Heinlein bought KFC in the 1970s, then sold it to PepsiCo, who split it up into Yum! Brands that still exist today. Despite Yum! Brands’ focus on Pepsi, KFC is still growing throughout Asia; it is the country’s largest cafeteria franchise. Yum! Brands divided up Yum China, which currently controls or franchises KFC restaurants across the country, and the Taco Bell and Pizza Hut operations in 2016.

KFC opened its first shop in Beijing’s Qianmen area in late 1987, making it China’s first Western fast-food franchise. By 1988, Beijing’s KFC had the maximum KFC sales worldwide. The restaurant preferred hiring managers from Asia’s developing countries, such as Taiwan, rather than the United States (McFadden et al., 2022). It established its distribution system to satisfy its high-quality standards because the infrastructure in China was either inadequate or non-existent. The early leadership was labeled the “Taiwan Gang” because they were Taiwanese (Yau, 2022). Despite KFC workers’ western education during its establishment, they were well-versed in Chinese culture and formed local alliances to build special meals and management systems. While the fried chicken was a standard meal in China at the time, hamburgers were innovative and unheard of, which provided the company with an advantage over its Western fast-food rivals.

Tony Wang, a Taiwanese businessman, was employed as a business consultant by KFC in 1975. KFC wanted Wang to lead the company’s Chinese expansion because he had established Orchid Food to tremendous success in Tianjin (Yau, 2022). KFC’s global expansion has been successful in Southeast Asia, particularly Singapore, Indonesia, Malaysia, and Thailand, but not in China. Wang’s journey to China was loaded with challenges, including a lack of transportation. Despite the difficulties, Wang opened five KFC locations before leaving the company in 1990.

SWOT Analysis

Strengths

KFC can improve its market share by improving product and service quality due to its devoted clients. It can contest the global market due to its high-quality foods and services. It competes against several well-known brands in the domestic market. Brand awareness is crucial in attracting new clients looking for solutions in multinational firms, joint ventures, and similar industries (Beamish & Morrison, 2018). KFC has a history of introducing new items to the home-grown market and catering to numerous markets grounded on customer feedback. The home market of KFC is an asset and a hindrance to the business’s expansion and novelty. KFC may thrive in its local market without much innovation, but it will need to invest more in R&D to break into the global market.

KFC’s management has been tempted to focus entirely on the domestic market up until now. It has collected numerous charters and copyrights through the development and acquisition of privileges from innovators. As a result, KFC may compete in various industries, including international trading and joint ventures. KFC has a high-Profit Margin; it is more expensive than its rivals, which has allowed its resources to fight competitive pressures and participate in R&D (Beamish & Morrison, 2018). KFC is a government-run restaurant that follows strict regulations. By cultivating solid contacts with lobbying groups and political networks, the firm will influence the climate of international business and joint ventures.

Weaknesses

Despite having a solid balance sheet, KFC’s “Return on Invested Capital” is a warning flag. Returns on Invested Money, rather than monetary analyst choices like Assets and Equity Returns, is a more reliable statistic of effectiveness in the global organizations and joint ventures in which KFC Fried operates. Despite the corporation’s various copyrights, the KFC business typical is modest to replicate. Intellectual property civil liberties are exceedingly difficult to enforce in the business of KFC (Beamish & Morrison, 2018). Intellectual property privileges successfully prevent same-size competitors from disrupting markets at various levels, but they are challenging to use in stopping starters from unsettling markets at countless levels. According to Allen Morrison’s Paul W. Beamish, customers today see environmental responsibilities as a critical component of doing business. Project organization is more concerned with internal outputs than the external stakeholders’ interests. This strategy can harm the company’s reputation and induce client dissatisfaction. KFC’s environmental record is poor.

Opportunities

KFC might take advantage of the more significant standardization trend to decrease the number of items in the market and concentrate on the most advantageous ones. The firm might benefit from artificial intelligence advancements in gauging consumer demand, servicing specific areas, and improving recommendation engines (Beamish & Morrison, 2018). Business models based on social media and e-commerce can enhance KFC build beneficial ties with suppliers locally and globally. With the high number of social media users worldwide, KFC can enter new markets and use fewer costs of reaching out to consumers. In addition, the organization could also lead to consumer marketing and crowd-sourced services based on data.

KFC has limited access to high-level talent worldwide due to a limited budget. As a result of its international expansion, it may tap into a worldwide talent pool. The firm can help recruit talent into the local market and develop into other global business and joint ventures sectors. On top of that, the company has a more significant opportunity to adapt to the changing technological environment like Artificial Intelligence (AI) and Machine Learning (ML), which transform KFC’s ecosystem (Beamish & Morrison, 2018). Thus, these technologies could help the company increase efficiencies, cut costs, and change operations. Due to globalization, the global marketplace has more open. KFC stands a chance to exploit opportunities like profitable worldwide markets and grow its market share. Development in the international market can benefit KFC expand its risk by lowering its dependence on the domestic market for sales.

Threats

KFC is focusing on China for its next phase of expansion. However, the economic relationship between China and the United States is deteriorating, which might lead to protectionism, increased trade friction, and more significant labor and business costs. The rising costs of labor in the developed marketplace due to environmental restrictions are a threat to the global development of KFC (Beamish & Morrison, 2018). The corporation deals with these costs as administrations seek to gather more environmental levies to inspire greener solutions. Correspondingly, KFC’s packing and shipping expenses may rise. With the increased pressure from non-governmental organizations and protest groups, KFC should be vigilant on constantly changing government regulations, mainly in labor and environmental safety.

Financial Status

Due to the outbreak of COVID-19 in 2019, KFC’s sales were significantly impacted, which negatively affected their revenues in 2020. KFC generated around 2.79 billion dollars in revenue in Yum! Brands’ managed geographic territories in 2021, representing a rise from the previous year’s 2.27 billion dollars (Locke, 2022). In China, the fast-food chain KFC, which Yum China owns, made over 5.8 billion U.S. Dollars in 2020, down from about six billion dollars the year before (Locke, 2022). The Chinese KFC will continue to develop and succeed in the future because it caters to Chinese tastes and offers menu options that will never be available in American outlets.

Conclusion

Companies should examine their operations since it assists in detecting all threats and issues, executing appropriate solutions, and evaluating the outcomes based on the data obtained. KFC may increase its market share by enhancing the quality of services. Despite having a solid balance sheet, intellectual property civil rights in the KFC industry are extremely difficult to enforce. Artificial intelligence breakthroughs in measuring consumer demand, addressing key regions, and enhancing recommendation engines could benefit the company. KFC has the potential to grow and enhance its effectiveness in the Chinese market based on the industry’s strengths and economic position.

References

Beamish, P., & Morrison, A. (2018). MBA SWOT: Kentucky Fried Chicken in China (C) SWOT Analysis & Matrix. EMBA Pro for Executive MBA Professionals. Web.

Locke, S. (2022). Yum! Brands revenue by brand 2021 | Statista. Statista. Web.

McFadden, C., Brahambhatt, R., Emir, C., McFadden, C., & Uysal, C. (2022). The History of KFC: Their Past and the Tech Building Their Future. Interestingengineering.com. Web.

Uddin, M. B. (2019). Customer loyalty in the fast food restaurants of Bangladesh.British Food Journal. Web.

Yau, E. (2022). How a Taiwanese businessman introduced KFC to China | 自由微信 | FreeWeChat. Freewechat.com. Web.

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