KFC MALAYSIA FOOD TAMPERING CRISIS

QUAN LAM

COM 473

PROFESSOR ELIZABETH KERNS

JULY 17TH 2012

Table of contents:

Executive Summary

SWOT analysis

Potential Crisis Comparison

Case Study

Bibliography

Executive summary:

Kentucky Fried Chicken (KFC) is one of the largest fried chicken fast food restaurants in all over

the world. It is a global-chain restaurant and a big competitor of other famous ones like Burger

King, Wendy’s, and the biggest rival: McDonalds’. For the purpose of this project, which

mentions about crisis occurred in KFC Malaysia, I just do some researches and relate to reading

materials from the textbook to analyze KFC Malaysia franchise. The project will cover the

SWOT, potential crisis comparison and case study of KFC Malaysia.

KFC Malaysia is a KFC franchise which has a long history of establishing. Being in Malaysia for

more than twenty years, KFC Malaysia becomes the major fast food service in the “Pearl of

Orient.” As its name is “fried chicken,” KFC mainly serves chicken related food, but still offer the

other sides like French fried, onion rings, and fried fish fillets.

As people are trying to live healthier and consider fast food is bad, especially in Malaysia, KFC

Malaysia also produces a new combo of healthier food with the mission of increasing

satisfaction among customers. Their target customers would be people in the age range

between 5 and 50 years old. It is necessary to mention that the healthy combo is not only

applied for the new products but also an update to all of the elder recipes.

It is nothing else to say if there was no big crisis occurred in 2011, when two footage clips about

KFC Malaysia making the food dirty prior cooking were uploaded on YouTube. This disgusted a

lot of KFC consumers and some of them related that story to similar case that happened to

Domino’s Pizza a few years ago.

KFC Malaysia did a great job by fast responding to the crisis. They made a great CMP (Crisis

Management Plan) with 8 steps. And with the supportive of social media, the crisis was gone

after a short time. It proved that KFC, as a big restaurant, was really serious in preparing for

crisis that may occur. In addition, the quick response and clever solution showed the

professional management of one of the famous fast food restaurants in the world.

SWOT

Strengths:

The biggest chicken restaurant chain and 2nd biggest fast food restaurant chain (after

McDonalds’)

Very well-known among people in all over the world.

Well-trained managers, motivated employees and franchises.

KFC is in everywhere, from the airport, outlets, shopping malls to some local areas.

Long time experience.

KFC can gain experience in Southeast Asia.

Malaysian managers and employees can speak English.

Weaknesses:

KFC only serves chicken-related food to customers when the others like McDonalds’ or

Burger King serve beef and fish fillet. -> limited productions

Some Malaysian customers are afraid of health issues from eating fast-food.

Franchises are less controlled and thus may bring less profit.

Corporate with other corporation may cause culture problem for KFC employees.

Opportunities:

They don’t have a lot of competitors in Malaysia.

Create more options for eating outside choices.

Expand to other Asian countries, where the number of potential customers is extremely

large.

Gain interest from customers in other Asian countries (like Vietnam, Thailand, etc…)

Be more social responsible such as having some environmental activities, sponsor for

green events, fundraising to help poor children, etc… to create a good image of KFC

Malaysia in particular and KFC mother corporation in general.

Creating healthy combo to hook up more customers.

Threats:

Biggest rival (McDonald’s) is doing business in the same country.

Other local restaurants can become potential competitors.

McDonald’s is serving more than chicken products such as fish and beef.

Poultry supply problems.

Political issues with local government

Market is different within other cities.

Analysis of SWOT

Strengths: KFC is the second biggest fast-food restaurant chain in the world, after McDonalds.

The other competitors like Burger King, Wendy’s and Subway cannot surpass KFC in revenue

and number of international franchises. Thus, customers would probably prefer KFC when

making choice of fast-food.

When hiring managers, KFC trains them carefully. To become a manager in KFC, people

have to take the courses related to leadership development, coaching skills, culture, interaction

management, fire safety, first aid training, food safety, human resources, workplace health &

safety, information systems, financial & operations accounting, and a lot more. In addition, KFC

local managers and employees in Malaysia can speak English fluently. This shows the serious in

building reputation of one of the biggest restaurants.

With a lot of experience in managing international franchises (more than 20 years in

Malaysia), KFC understands the demand of people in each area. By appearing in everywhere

including airports, outlet malls, to some other local areas, KFC build a perception to people that

whenever they need food, they will see KFC first.

Weaknesses:

One of KFC’s biggest weaknesses is serving chicken-related food only to customers.

From chicken baskets and/or chicken nuggets to chicken hamburgers, KFC is very monotonous

in their dishes although the tastes from each region are different. Moreover, the bird flu which

killed many people in 2009 cause a fear of eating chicken among people. In addition, some

Malaysian customers are afraid of eating too much fast-food would cause obese – one of the

world’s biggest issues.

Managing the franchises is another story. Opening more franchises is equal being busier

with controlling and training employees. If one small franchise of KFC has problem, its

reputation will be affected much. People won’t blame a lot on the franchise but the way KFC

trained their managers. Thus, it’s not wrong to say the strength of opening many franchises in

all over the world could also be the weakness. On the other side, corporate with other

corporation (KFC is a brand of Yum! Co) may cause some culture problems for employees when

there is a culture gap between Western and Eastern countries.

Opportunities:

So far, KFC has a lot of potential opportunities when investing in Malaysia, as like other

Asian countries. First, their competitors like Burger King, Wendy’s and Subway don’t have

franchise in Malaysia. KFC just focus on competing with McDonald’s. Second, gaining business

experience from small countries like Malaysia can help KFC expand more in other Asian

countries. Third, KFC has a chance create a good image by being social responsible. The life

condition is increasing which means people care more about community activities. Holding a

green event with cleaning up rivers or sponsoring for a children soccer league, raising funds to

give some hope to poor families, etc… could be applied thoroughly. Finally, understanding the

biggest concern of Malaysian people is being overweight; KFC can create a healthy combo with

other additional ingredients to hook up more customers.

Threats:

McDonalds, KFC’s competitor, is doing business in almost the same countries to KFC

(except Vietnam). This may cause difficulty because they are also making some healthier

combos to attract more customers. Besides serving chicken products, McDonalds also serve fish

and beef. However, McDonalds Malaysia seems not to be the biggest rival of KFC Malaysia. The

problem is Malaysia is a small country with the population around 28.3 million people (2010)

which stand a lot of local restaurants. Those restaurants can directly compete with KFC in sales.

On the other hands, poultry supply, local government and market differences are the

next challenges of KFC Malaysia. A small country like Malaysia cannot produce enough chicken

to serve in the restaurants so they have to partly import from the other countries like China,

Thailand or Vietnam. This can be a big concern for customers because of the bird flu disease in

2009 which killed many people. Besides that, KFC Malaysia has to deal with some regulations of

the local government about food safety and the other potential laws which may limit the

business. Malaysian people love fresh meat. Thus, in some places, especially are rural areas

where people prefer their home chicken, using mutant chickens would not bring much profit

when the money used for investment is a lot. This can potentially cause a big loss.

POTENTIAL CRISIS COMPARISION (LIKELYHOOD, IMPACT): KFC Malaysia

1. Natural disasters: When an organization is damaged as a result of the weather or “acts of God.”•Landslides 4 4 •Acid rain 3 4•Flood 5 5 •Tsunami 4 5 •Epidemic 4 4•Wind storm 3 2

 2. Malevolence: When some outside actor or opponent employs extreme tactics to express

anger toward the organization or to force the organization to change.•Bribery 1 0 •Embezzlement 2 4•Explosion (Bombing) 1 4•Kidnapping 2 4•Robbery 2 3

 3. Technical breakdowns: When the technology used or supplied by the organization fails

or breaks down.•Product failure 3 5•Transportation accident 2 3•Transportation failure 3 4

 4. Human breakdowns: When human error causes disruption.

•Contamination 2 5•Product failure (because of human error) 1 3•Transportation accident (because of human error) 1 2•Fatality (if caused by accident) 1 2•Violence 2 5

 5. Challenges: When the organization is confronted by discontented stakeholders. The

stakeholders challenge the organization because they believe it is operating in an inappropriate manner or it does not meet their expectations.•Boycott 3 5•Lawsuits 3 5•Layoffs 3 3•Negative legislation 2 4•Strikes 1 4•Takeover 1 3•Acquisition 1 2

 6. Mega-damage: When an accident creates significant environmental damage.

•Chemical spill or leak 1 5

•Contamination 2 5•Explosion 1 5•Fire 2 5•Toxic waste 2 5

 7. Organizational misdeeds: When management takes actions it knows will harm or place

stakeholders at risk for harm without adequate precautions. These acts serve to discredit or disgrace the organization in some way.•Bankruptcy 1 4•Bribery 1 3•Embezzlement 2 3

 8. Workplace violence: When an employee or former employee commits violence against

other employees on organizational grounds.•Murder 1 3•Racial issues 1 5•Sexual discrimination 1 3•Sexual harassment 1 3•Suicide 1 4•Workplace violence 1 5•Age discrimination 1 4

 9. Rumors: When false information is spread about an organization or its products. The

false information hurts the organization’s reputation by putting the organization in an unfavorable light. •Food hygienic 3 5•Chicken slaughtering 3 5

Potential Crisis Comparison analysis:

Natural disaster: Malaysia is contiguous with South China Sea and it is the

second country which has to deal with many natural disasters per year, after

Philippine. Statistically, from 1980 to 2010, natural disasters in Malaysia had

killed 1,239 people, which mean an average of 40 people per year. 22.2% of

killed people were caused by storms, 43.4% were killed by epidemic, 15.7%

were killed by flood and the remains were killed by landslides. Flood is

number one of disasters in Malaysia that happens almost every year and

affected 17,614 people in the past 30 years. Landslides, acid rain, tsunami,

epidemic and windstorm are after flood about destruction. The numbers

show that every kind of disaster can cause a big loss for KFC Malaysia. When

knowing the flood is coming, people will store food and find ways to survive.

All stores must be closed and the damage after flooding is immeasurable.

Malevolence: Malaysian society is not very complicated. According to

Malaysian government website, violent crime cases are very rare. As like

every country in the world, Malaysia also has residential burglaries or pocket-

picking thieves. It seems like there is extremely rare, or no occurrence of

kidnapping, briber, embezzlement or explosion. This may cause a subjective

thinking among tourists. Regularly, criminals aim foreigners to steal because

they are less carefully and have much money. It’s the reason why the

likelihood for each side of malevolence is low but the impacts are high.

Technical breakdowns: In general, the machines used by KFC, as well as

other fast-food restaurants are fryers, electronic cash register and other

lightning or air conditioning systems. In addition, the transportations which

are used for food delivery are primarily motorbikes or bikes. It’s not a big

problem for slow food delivery but it is truly a big deal for giving the wrong

ones to the customers. People order fast-food which means they don’t want

to wait for such a long time including correcting mistakes. In addition, the

reputation of KFC would be hurt if that happens more often.

Human breakdowns: KFC Malaysia is the most famous KFC franchise which

has many scandals related to food hygienic. From the footage video post on

YouTube about food tampering in the past few years to contaminate the

chicken patties before cooking just for fun, all four KFC franchises in Malaysia

used to be boycotted by the customers. Lately, in February 6th 2012, another

video recording an employee from KFC Malaysia punched one customer to

the face. Blogs, Facebook pages and personal websites were created and

called for boycotting among customers. It doesn’t happen regularly but the

time gap between the food tampering video and violence video was too

short. They are both crisis and could hurt KFC Malaysia’s reputation the

most.

Challenges: Again, as stated above, the main challenges of KFC Malaysia are

being boycotted and filed a lawsuit. In fact, customers may sue KFC Malaysia

for making their food dirty, which affect directly to their health. In addition,

using violence by punching customer is extremely unacceptable. It is

unprofessional or actions of the thugs, not an employee of one of the biggest

restaurants. Thus, those two are the most concerns of KFC Malaysia because

they were widely spread on YouTube with hundred thousands of views. The

other things which are not primary and do not affect KFC a lot.

Mega-damage: There was no article or post about chemical leak, explosion,

fire, or toxic wasted in KFC Malaysia. However, it doesn’t mean that those

things never happen. They rarely occur but once they are, it is a big problem

for KFC Malaysia because they may cause food poisoning and/or may kill the

customers. Thus, the effectiveness of those factors is worth a grade 5 out of

5. Sometimes, when natural disaster happens such as earthquake or storm,

electrical leakage could happen and cause fire. It is unavoidable but need to

be well prepared to reduce damage.

Organization misdeeds: If KFC Malaysia let the related stories to the food

tampering or violence at work happen more often without any sanction, it

would lead to the close for those franchises. Closing franchises in one

country would not affect much on KFC’s income but on KFC’s reputation and

it could be dismissed from the second place. Bribery or embezzlement is not

likely to happen or at least, there was no story related to those problems in

the past ten years. Moreover, the fact is customers just care about the

quality of their favorite food with an acceptable price (the price that they pay

regularly) and don’t mind a lot about inside stories of KFC.

Workplace violence: This is another story of KFC Malaysia. KFC is

internationally and one of the main languages in Malaysia is English. Thus,

there was no reason for racial issues or discriminations to occur. Moreover,

workplace, working environment, community and market place are in KFC

Malaysia Corporate Social Responsibility annual reports so it can be sure that

the least likely of murder, suicide or age discrimination would occur.

Rumor: No company did not involve in rumors. Domino was struggling with

the footage video about the employee contaminate food. McDonalds and KFC

had to deal with video on YouTube about chicken serial killing in a cruel way

and dirty factory. Rumor about KFC Malaysia was easy to find on Google. The

power of social media like blogs, Facebook, Twitter and YouTube is really

strong. In fact, KFC Malaysia has a big amount of hated people who always

call for boycotting fried chicken.

Case study: KFC Malaysia with food tampering scandal.

Crisis background: On June 25th 2011, internet community tumult because of

two video posted on YouTube showing that KFC Malaysia employee did some

disgusting things to the chicken before cooking them. This became a hot

topic because there was footage about McDonald’s chicken serial killing in

2010. People became more and more afraid of their food quality when eating

at fast food restaurants.

Bloggers, Facebook and YouTube users were shocked while watching those

“unacceptable” actions. One of the two video was deleted by the user but

the other one name “Kentucky Fried Chicken Malaysia Staff with Stupid

Behavior” is still on YouTube. One video shows two employees were

squeezing the rags which were used for cleaning to the cooking bowl and

laughing. The other one shows a man swiping a piece of chicken against the

sole of his shoe.

KFC customers show their anger and disgust about what they have watched.

“KFC promised the customer with quality assurance. After watching the video from YouTube, I

don't think that KFC keeps their promises. I'm a regular customer of KFC and now, I don't think I

will stop by KFC for my breakfast or lunch anymore. It's disgusting seeing it and it's sickening

after imagining me eating the dirty chicken. Where is the quality? Personal cleanliness, well, I

don't see it. I really do hope that the management of KFC search these guys and sack them out

of this F&B field. I also do hope to hear from the management of KFC…,” said CTinellw, a

member on www.complaintsboard.com.

“I will not go to KFC, i will tell my family members to tell their friends and relatives about this

video and don't ever go to KFC and i will tell my friends and let them spread the news to their

friends, family members and relatives that KFC is nothing but serving low quality and low

hygiene of food. The video in YouTube will be shared worldwide. Unless KFC do something for it

because KFC mistake is: They hired staffs that have tarnished their own reputation,” said

haruko_kaede on www.complaintsboard.com

“I don't want to eat chicken with shoe flavor. Please investigate this. Thanks!” - said m3ea from

Complaintsboard.com

Information from the internet is spread with the speed of light. For shocking news, it goes

faster. Thus, after a day of posting, there were millions of people watched and commented.

Most of them are negative comments. KFC customers also create a Facebook page calling for

boycotting KFC in Malaysia. Bloggers wrote many side stories related to their bad experience

with KFC. The others complain about KFC Malaysia customer services were below average

because some of them had to wait from 45 minutes to 1 hour to get their food.

KFC Malaysia manager announced that they had reported this problem to the local police and

asked for help. In addition, they did some investigations among the employees but there was

no result. However, on July 11th 2011, TV news broadcast in Malaysia stating that KFC Malaysia

managers received the video in June 2010 but they did not response until it went viral in June

2011.