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STRATEGIC MARKETINGFINAL PROJECT

Submitted to:

Mr. Khurshid AhmedSubmitted by:

Ali Murad MB061077Rizwan Saleem MB063042

Kaleem Ahsan MBE083005Asif Mahmood MB063031

Azeem Mahmood MB063046Khalid Mahmood MB063051

Muhammad Umair MB083050

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Muhammad Ali Jinnah University

We dedicate this report to our Parents and respectable Teachers

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ACKNOWLEDGEMENT:

First of all, we would like to offer our eternal thanks to the Almighty

Allah who blessed us with the perseverance and the sprit of hard work

to complete this project. We are also grateful to our parents for their

patience and belief in us. We offer our respectful gratitude to our

Strategic Marketing course supervisor Mr. Khurshid Ahmed for his

guidance & encouragement. We would like to thank all of those people

specially the Marketing Manager of KFC Mr. Sheikh Sohaib who helped

us through our entire Strategic Marketing project.

KFC Group Members December

21st, 2008

Mohammad

Ali Jinnah University

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TABLE OF CONTENTS:

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EXECUTIVE SUMMARY

1

Mission statement:

To establish in Pakistan our position as leading WQSR (Western Quick

Service Restaurant) chain, serving good value. Innovative chicken-

based products. Consistently, providing a pleasant dining experience,

with fast friendly, in a clean and convenient location. At all times we

must be dedicated to providing excellent and delighting customers.

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COMPANY OVERVIEW:

Colonel Harland sanders, born September 9, 1890,

actively began franchising his chicken business at the

age of 65. Now, the Kentucky fried chicken business

he started has grown to be one of the largest retail

food service systems in the world. And colonel

sanders, a quick service restaurant pioneer, have

become a symbol of entrepreneurial spirit. More than two billion of the

colonel’s “finger lickin’ good” chicken dinners are served annually. And

not just in America. The colonel’s cooking is available in more then 82

countries around the world.

When the colonel was six, his father died. His mother was forced to go

to work, and young Harland had to take care of his three year old

brother and baby sister. This meant doing much of the family cooking.

By the age of seven, he was a master of a score of regional dishes. Ate

age 10, his first job working on a nearby farm for $2 a month. When he

was 12, his mother remarried and he left his home near Henryville,

Ind., for a job on a farm in Greenwood, Ind. He held a series of jobs

over the next few years, first as a 15-year-old streetcar conductor in

New Albany, Ind., and then as a 16-year-old private, soldiering for six

months in Cuba. After that he was a railroad fireman, studied law by

correspondence, practiced in justice of the peace court, sold insurance,

operated an Ohio River steamboat ferry, sold tires, and Operated

service station. When he was 40, the colonel began cooking for hungry

travelers who stopped at his service station in Corbin, KY. He didn’t

have a restaurant then, but served folks on his own dining table in the

living quarters of his service station. As more people started coming

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just for food, he moved across the street to a motel and restaurant that

seated 142 people. Over the next nine year, he perfected his secret

blend of 11 herbs and spices and the basic cooking technique that is

still used today.

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Operations in Pakistan:

KFC started its services in 1997 for the first time in Pakistan. Now it

has a chain of 26 branches all over Pakistan. It was introduced in the

Pakistani market by the Artal Group of Belgium and although a late

entrant, it managed to establish several outlets in Karachi, Lahore and

several more areas. After a through survey and analysis KFC opened

its first branch in Garden town Lahore seven years back. Since then

there was no looking back for KFC as it started to earn profits and grow

to other different cities. KFC in Pakistan has been shoeing a steady

growth and profitability. Some profits were used for team making,

uplift of the restaurants etc. KFC believes in providing “value for

money” to its customers. They have high quality standard and they are

in concurrence to those prevailing in other countries. They have an

international brand name to protect so there is strict implementation of

quality standards.

Procurement Issues:

All the raw materials like chicken are bought from value chicken,

vegetables from Monsalwa and they use caned fruit for salads. The

machinery is all automated and is in conformance to international

standards. KFC officials often visit the outlets without giving prior

notice in order to check the conformance to quality standards and

procedures. Moreover, Food Inspection Teams from Health Ministry

visits twice a year to ensure Hygienic Conditions at the Kitchen.

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Performance Overview:

KFC has taken advantage of all these excellent investment

opportunities that Pakistan offers for franchising and has expanded

and penetrated the market a lot. KFC has adapted to the legal and

political environment and conditions of Pakistan. The Pakistani culture

has also molded the operations of KFC in Pakistan. All the outlets of

KFC in Pakistan present Pakistani food culture. KFC has displayed

banners that it servers Halal food all over its outlets which represents

Pakistani culture. They also offer families’ deals as the people are very

close to their families and like to have food with them. KFC has also

brought some changes in the culture of Pakistan. The most significant

is the way it has changed the eating habits of the local population.

People now are aware of unhygienic conditions that prevail in some of

local restaurants. And KFC has also brought the idea of self-service in

Pakistan. 

Goals of KFC:

Build an organization dedicated to excellence.

Consistently deliver superior quality and value in our products and services.

Maintain a commitment to innovation for continuous improvement and grow,

striving always to be the leader in the market place changes.

Generate consistently superior financial returns and benefits our owner and

employees.

Values of KFC:

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Focus all our resources to our restaurants operation because that is where we

serve our customers.

Reward and respect the contributions of each individual at KFC.

Expand and update training with time and be the best we can be and more.

Be open, honest and direct in our dealings with one and other.

Commit ourselves to the highest standard to the personal and professional

integrity at all times.

Encourage new and innovative ideas because these are the key to our

competitive growth.

Reward result and not simple efforts.

Dedicate ourselves to continuous growth in sales, profit and size of

organization.

Work as a team.

Key Strategies of KFC:

KFC is following Niche Marketing and Societal Marketing

techniques.

KFC possess a western culture because some of the Pakistani

people are also following that culture.

KFC are moving from Divisional Level to the District level by

opening branches in Jehlum and Gujranwala.

KFC also offer free home delivery.

KFC open their outlets on reachable places.

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General Manager (GM)

Manager

Assistant Manager (I)

Shift In-charge

Assistant Manager (II)

Counter workers

Kitchen workers

Guards

KFC menu consists of more than 30 products.

KFC gives more priority to Family.

Organizational Structure:

The KFC adopted traditional structure for their outlets that other food

chains are following. There is one General Manager for Pakistan. The

outlet is leaded by the Manager, assisted by two assistant managers,

and one shift in-charge for each shift, that supervises the performance

of counter workers and kitchen workers

.

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MARKET SEGMENTATION:

KFC has divided the market of Pakistan into distinct groups of

customers with different demands, tastes and behavior who require

separate products or marketing mix. In Pakistan the niche marketing is

being used for particular classes of people. They have made segments

of the market on the following bases.

Demographical

Behavioral

Geographical

By using these three bases they segmented the market as under.

Demographical Basis:

Demographic means the study of human population in terms of size,

density, age, gender, location, race, occupation and other statistics.

Age

People of different ages have different demands and taste of the

products. So if we divide the customers according to age we can get

better results. In Pakistan youngsters are more conscious about their

diet as compared to elders. So KFC have rightly targeted kids and

middle age people.

Income

Income is one of the most important factors in success of KFC. It have

targeted high and middle income group

Behavioral Basis:

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In behavioral aspect they segmented the market on the basis of

quality, taste and price. Following are the different possible segments

in this regard.

Taste conscious

Quality conscious

Class conscious

Combination of price and quality

Geographical Basis:

On the basis of the geographical factor we have divided our market in

two main segments.

Urban areas

Sub urban areas

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Strategies for new product development

A firm can obtain new products by using the following strategies:

• Acquisition

• New Product Development

Acquisition means acquiring the business, product of any other

organization that is selling its business. New Product Development

means creating a new idea and forming a new product to the market.

New Product Strategy in KFC:

KFC use to create new ideas and make new products at its own, it does

not go for acquisition. KFC use new product development for having a product

line extension.

New Product is defined as a product new to;

The world

The market

The producer

The seller

Some combination of above

Here is given some of the NPD process elements which KFC uses in the development

and launching of new product in the market. The process is well defined in a way that it

depicts us the true picture of NPD in the real world. The strategies that are been used in

this whole process are been discussed as under:

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1) Idea generation:

This element is based on the idea that by observing the market need and demand. This

refers to the development of new concept that better satisfy the market need. KFC use

this thing in developing new product in a way that they look for the market, the

customers and the competitors. This gives the idea of a new product that will give them

competitive advantage in the market over other fast food providers. It includes the

internal as well as external idea sources as ideas through our conducted research and then

the expected customer’s response.

2) Idea screening:

After generating the idea, it comes the screening process in which KFC eliminate the less

good or in other words less profitable ideas. This stage includes the refining of the

product, addition and reduction in the product. This is the first filter in the product

development process, which eliminates ideas that are inconsistent with the organization’s

new-product strategy or are inappropriate for some other reason.

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3) Concept development:

This includes working on the concept, to have a survey about the concept that how much

it is acceptable in the market. KFC work on the modification in the product concept

according to the market trends, so that it can be acceptable in the market. Developing the

level of quality, product quantity, contents of the product and other things are the part of

concept development. This does not involve the actual formation of product.

4) Concept testing:

KFC use to test the concept on out targeted customers by asking questions and get to

know that how much the concept is acceptable up to how much percentage. This is

basically a test to evaluate a new-product idea, usually before any prototype has been

created.

5) Business analysis

KFC checks out the over all picture of new product concept including the demand, costs,

sales and profit projections. This tells about the benefits that product will provide during

its life cycle.

6) Product development

The practical formation of the product for testing purpose is the concept development

stage; in this stage, KFC gives a tangible form to the concept that can be tested in the

market. It refers to the development of the product concept into a physical product

Creation of prototype

Marketing strategy

Technical production feasibility

Final management approvals if needed

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7) Test marketing

This step includes finally the test marketing, the stage at which the product and marketing

program are introduced into more-realistic market settings. This refers to limited

introduction of a product and a marketing program to determine the reactions of potential

customers in a market situation. KFC have the need of this stage to know about the

product’s feedback from the market.

8) Commercialization

Finally, the introduction of the product in the market, this is the last stage of new product

development strategy in KFC. This includes the promotion techniques, advertising and

sales promotion. KFC promote their product by using advertisement on different media

channels. The stage involves these points as well:

Inventory Building

Distribution Shipment

Customer Advertisement

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History of developing product mix of KFC

In 9th September 1980, Harland Sanders is born just outside Henryville,

Indiana.

1900-1924

Harland Sanders holds a variety of jobs including: farm hand, streetcar

conductor, and army private in Cuba, blacksmith's helper, rail yard

fireman, insurance salesman, tire salesman and service station

operator for Standard Oil.

1930

In the midst of the depression, Harland Sanders opens his first

restaurant in the small front room of a gas station in Corbin, Kentucky.

Sanders serve as station operator, chief cook and cashier and name

the dining area "Sanders Court & Café."

1936

Kentucky Governor Ruby Laffoon makes Harland Sanders an honorary

Kentucky Colonel in recognition of his contributions to the state's

cuisine.

1937

The Sanders Court & Café adds a motel and expands the restaurant to

142 seats.

1939

The Sanders Court & Café is first listed in Duncan Hines' "Adventures in

Good Eating."

Fire destroys The Sanders Court & Café, but it is rebuilt and reopened.

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The pressure cooker is introduced. Soon thereafter Colonel Sanders

begins using it to fry his chicken to give customers fresh chicken,

faster.

1940

Birthdate of the Original Recipe

1949

Sanders marries Claudia Price.

1952

The Colonel begins actively franchising his chicken business by

traveling from town to town and cooking batches of chicken for

restaurant owners and employees.

The Colonel awards Pete Harman of Salt Lake City with the first KFC

franchise. A handshake agreement stipulates a payment of a nickel to

Sanders for each chicken sold.

1955

An interstate highway is built to bypass Corbin, Kentucky. Sanders sells

the service station on the same day that he receives his first social

security check for $105. After paying debts owed, he is virtually broke.

He decides to go on the road to sell his Secret Recipe to restaurants.

1957

Kentucky Fried Chicken first sold in buckets

1960

The Colonel's hard work on the road begins to pay off and there are

190 KFC franchisees and 400 franchise units in the U.S. and Canada.

1964

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Kentucky Fried Chicken has more than 600 franchised outlets in the

United States, Canada and the first overseas outlet, in England.

Sanders sell his interest in the U.S. Company for $2 million to a group

of investors headed by John Y. Brown Jr., future governor of Kentucky.

The Colonel remains a public spokesman for the company.

1965

Colonel Sanders receives the Horatio Alger Award from the American

Schools and Colleges Association.

1966

The Kentucky Fried Chicken Corporation goes public.

1969

The Kentucky Fried Chicken Corporation is listed on the New York Stock

Exchange.

1971

More than 3,500 franchised and company-owned restaurants are in

worldwide operation when Heublein Inc. acquires KFC Corporation.

1976

An independent survey ranks the Colonel as the world's second most

recognizable celebrity.

1977

Colonel Sanders speaks before a U.S. Congressional Committee on

Aging.

1979

KFC cooks up 2.7 billion pieces of chicken. There are approximately

6,000 KFC restaurants worldwide with sales of more than $2 billion.

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12/16/1980

Colonel Harland Sanders, who came to symbolize quality in the food

industry, dies after being stricken with leukemia. Flags on all Kentucky

state buildings fly at half-staff for four days.

1982

Kentucky Fried Chicken becomes a subsidiary of R.J. Reynolds

Industries, Inc. (now RJR Nabisco, Inc.) when Heublein, Inc. is acquired

by Reynolds.

1986

PepsiCo, Inc. acquires KFC from RJR Nabisco, Inc.

1997

PepsiCo, Inc. announces the spin-off of its quick service restaurants -

KFC, Taco Bell and Pizza Hut - into Tricon Global Restaurants, Inc.

2002

Tricon Global Restaurants, Inc., the world's largest restaurant

company, changes its corporate name to YUM! Brands, Inc. In addition

to KFC, the company owns A&W® All-American Food® Restaurants,

Long John Silvers®, Pizza Hut® and Taco Bell® restaurants.

2006

More than a billion of the Colonel's "finger lickin' good" chicken dinners

are served annually in more than 80 countries and territories around

the world.

2007

KFC proudly introduces a new recipe that keeps the Colonel's 11 herbs

and spices and finger-lickin' flavor, but contains Zero Grams of Trans

Fat per serving thanks to new cooking oil.

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Competitor and their Product Mix Analysis:

KFC does not consider Mc Donald’s are its direct competitors. As Mc

Donald’s has a limited menu and cater to different segments of society

e.g. Mc Donald is catering to lower middle society of Pakistan. Though

KFC has faced a little competition from local restaurants but their

breakeven in terms of revenue has been done and they are planning to

expand further to other cities like Islamabad and Peshawar. 

List of Competitors:

Macdonald’s

Burger King

AFC(alnajam fried chicken)

PFC(perfect fried chicken)

And number of other Pakistani fast foods like Dantey’s and Mr. Chips &

Mr. Tasty K&N etc.

Product Mix of KFC

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Other Products:

•Original recipe® chicken •Extra Tasty CrispyTM chicken

•Hot WingsTM pieces •Tender Roast® chicken

•Chunky Chicken pot pie •Kentucky Nuggest®

•Colonel’s Crispy Strips® •Honey BBQ sandwich

•Original Recipe® Sandwich •Tender Roast® Sandwich

•Triple Crunch® Sandwich •Triple Crunch ®Zinger® sandwich

Product Mix of MacDonald’s:

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Competitive advantage:

KFC

Spicy Products

Pakistani people like spicy products instead of boiled food

Arabian Rice and Zinger Burger

Free Delivery

Chicken is eaten by every community

Local Staff and Highly Qualified because local staff can better

deal with the customers

KFC uses Top to Bottom and Bottom to Top Approach in

Management.

KFC is Co branding with Walls

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Strategies for promotional mix

Promotion is one of the necessary plates in any form of business or in

other words, you can say that promotion is the key of success. If you

promote your product at the right time. KFC also known the

importance and significance of promotion so they uses the bill boards

the major source of advertisement and one of the most important thing

that they uses media especially the newspapers to promote their

products. They are also creating awareness among the masses about

their existing product range as well they tell us about the future

product.

Marketing efforts to be taken by the restaurant:

Paste delivery posters at petrol pumps, flats, colleges, plazas, and

departmental stores.

Distribution of delivery flyers in residential areas, markets, plazas

and institutions (as per the plan)

Visit offices and business places.

In summarize KFC uses these are the strategies to expand their products to gain the

competitive edge.

Personal selling

Telemarketing

Direct mail

Trade fairs and exhibitions

Commercial television

Newspapers and magazines

Radio

Cinema

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Point of sale displays

Packaging

Pricing strategies of KFC

KFC during pricing their products keep the different points in the mind

like they adopt the cost base price strategy. Pricing of the product

includes the Government taxes and excise duties and then they come

at final stage of determine the price of their products. KFC prices of

products are a bit high according to the market segment and it is also

compatible to the stander of their products.

Calculation of the price under Cost Based Pricing Strategy:

Total Pounds of Chicken Served in KFC Restaurant Annually =

1.914 Billion

Total KFC Chicken Pieces Sold Annually = 5.89 Billion

Total Retail Sales = $8.9 Billion

Sales Price of per Chicken Piece = Total Retail Sales / Chicken

Pieces sold

= $8.9 Billion / $5.89 Billion

=$1.51

We assume that Fixed Cost is = $6000000000

Variable Cost = $675000000

Profit Margin is Or Mark Up = $225000000(25% of Sales)

Per Unit Variable Cost = $675000000 / 5890000000

= $ 0.115

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Unit Cost = Variable Cost + Fixed Cost / Chicken pieces Sold

= 0.115 + 6000000000 / 5890000000

= 0.115 + 1.02

= $1.135

Now suppose manufacturer wants to earn 25% mark up on sale. The

manufacturer mark up price is calculated:

Mark Up Price = Unit Cost / (1 – Desired Return on Sales)

=1.135 / (1-.25)

= 1.135 / 0.75

= $1.51

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BCG Matrix of KFC

The need for strategy, in order to expand its existing product in very promising markets

for KFC is very essential. KFC, along with McDonalds, and other major fast food chains

have dominated the American continent as well as else where. Since the 1950’s when the

founder of KFC had a dream, of building an empire in the fast food market, the company

has undergone lots of changes. The company has changed ownership; it has taken over

from Pepsi and passed over to Tricon, which owns Pizza hut, Taco bell and others.

Nowadays, KFC, still dominates the chicken fast food industry while has stores in more

than 100 countries operating vast profits. (De Witt 'et al.2004a) Although, due to

increased conditions of life, and differentiation of the life style of the population around

the world, there is still a lots of room for expansion, especially in countries with large

population, and high development rate. KFC using the BCG matrix and SWOT analysis

to analyze what is the current position of the company and identify that the company has

the potentials to growth in fast food market.

In the late 1960s the Boston Consulting Group, a leading management consulting

company, designed a four-cell matrix known as BCG Growth/Share Matrix. This tool

was developed to aid companies in the measurement of all their company businesses

according to relative market share and market growth.

The BCG Matrix made a significant contribution to strategic management and continues

to be an important strategic tool used by companies today. The matrix provides a

composite picture of the strategic position of each separate business within a company so

that the management can determine the strengths and the needs of all sectors of the firm.

The development of the matrix requires the assessment of a business portfolio, which

include an organization’s autonomous divisions (activities, or profit centers).

The BCG or growth- share matrix imposes a two- dimensional analysis on management

of Strategic Business Units: a comparative analysis of business strength and an

assessment of the environment. The business strength measure is the business’s Relative

Market share. The environmental measure is the Market Growth Rate.

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BCG Matrix: The market growth rate measures industry attractiveness. Because for the

case of YUM Brand, all SBUs (KFC, Taco Bell, Pizza Hut, Long John Silver’s, A&W)

are located in the same fast- food industry, the referent standard is the industry growth

rate measured against the SBUs’ growth rate. The underlying theory for examining

market growth rate is the industry life cycle. The BCG assumes that growth rates ( life

cycle stages) affect a firm’s finances.

Placing products in the BCG matrix results in 4 categories in a portfolio of a company:

1. Stars (=high growth, high market share)

Use large amounts of cash and are leaders in the business so they should also

generate large amounts of cash.

Frequently roughly in balance on net cash flow. However if needed any attempt

should be made to hold share, because the rewards will be a cash cow if

market share is kept. So, KFC Malaysia is under Star position.

2. Cash Cows (=low growth, high market share)

Profits and cash generation should be high, and because of the low growth,

investments needed should be low. Keep profits high.

3. Dogs (=low growth, low market share)

Avoid and minimize the number of dogs in a company.

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Beware of expensive ‘turn around plans’.

4. Question Marks (= high growth, low market share)

Have the worst cash characteristics of all, because high demands and low

returns due to low market share

If nothing is done to change the market share, question marks will simply

absorb great amounts of cash and later, as the growth stops, a dog.

The Characteristics of each SBU

Type SBU Strategy SBU

profits

Required Investment Net Cash Flow

STAR Hold/ Increase High High -or+

Cash Cow Hold High Low High+

Question Mark Increase/Divest 0 or - Very High or

Disinvest

High-or+

DOG Harvest or Divest Low or- Disinvest +

The analysis requires that both measures be calculated for each SBU. The business

strength dimension, relative market share, is included to measure competitive advantage.

The KFC is falling on cash cow where a low growth and high market share is. So, the

profit and cash generation is high and because of low growth, investments needed should

be low. The funds received from cash cows are often used to help other businesses within

the company, to allow the company to purchase other businesses, or to return dividends

to stockholders. So the KFC should hold on what it has doing now.

Three Paths to Success (star-cash cow-question mark)

Continuously generate cash cows and use the cash throw-up by the cash cows to

invest in the question marks that are not self-sustaining

Stars need a lot of reinvestments and as the market matures, stars will degenerate

into cash cows and the process will be repeated.

As for dogs, segment the markets and nurse the dogs to health or manage for cash

Three Paths to Failure (star-question mark-dog, cash cow-dog)

Over invest in cash cows and under invest in question marks

Trade further opportunities for present cash flow

Under invest in the stars

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Allow competitors to gain share in a high growth market

Over milked the cash cows

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Recommendations

It must also reduce their prices to compete their competitors like

McDonald, & Crisps Pins

They should introduce local dishes

They should promote eastern culture

Special offers according to circumstances

Provision of customer service

Extending their business in local areas

Low cost in economic recession

Latest technology in operations

Resources

General manager

(Assistant Manager KFC)

Employees Book of KFC

(Focus on Monthly Journal KFC)

Internet

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