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    KFC Marketing and Management Executive Summary

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    MARKETING AND MANAGEMENT EXECUTIVE SUMARY Table of Contents 1. Company Profile and History4 2. Current Market Situation4 2. 1 PEST Analysis4 2. 2 Porter’s Five Forces6 2. 3 Competitor Analysis7 2. 4 Market Segmentation8 3. SWOT and issue analysis11 3. 1 SWOT analysis11 3. 2 Key Successful Factors13 3. 3 Issue Analysis13 4. Objectives14 5. Marketing Strategy14 Appendix15 Figure 215 Reference16 1. Company Profile and History Kentucky Fried Chicken (KFC), founded by Colonel Harland Sanders in 1930, has developed to become one of the largest fast-food chicken operator and franchiser around the world with more than a billion “finger lickin’ good”.

    In 1966, it went public and was acquired by PepsiCo, Inc. In 1997, PepsiCo spun-off of its quick service restaurants including KFC into an independent restaurant company, Tricon Global Restaurants, Inc (KFC Vietnam 2008). The company now was known as Yum! Brands Inc which included all the restaurants: A&W Restaurants, Long John Silver’s, Pizza Hut and Taco Bell. KFC has more than 11,000 restaurants operating in more than 80 countries and territories in the world. Today it is one of the most famous and strongest brand names in the fast food market (Entrepreneur Media 2009).

    In 1997, KFC restaurants opened its first outlet in Ho Chi Minh City – Vietnam. Today, due to the trend of the busy life style and the increase in earnings of people in big cities like Ho Chi Minh City, KFC Vietnam franchise expanded its network so far to 75 restaurants with 47 outlets in Ho Chi Minh City, 15 outlets in Hanoi and others in many Vietnamese provinces (KFC Viet Nam 2008). Company officials considered Vietnam as a potential growth market in fast food industry. KFC’s goal is to secure its position as a market leader and increase the market share in Vietnam. . Current Market Situation 2. 1 PEST Analysis This section presents relevant background data on the current Vietnamese macro-environment. Political Factors After the join of Vietnam to the WTO, Vietnam’s new commercial franchising law provided for a legal regulatory climate conductive to the franchising sector. The government policy encouraged the opening up of foreign franchises which are expected to grow. With an annual growth of 30 percent in recent years, franchising showed great potential as a form of business in Vietnam (U.

    S Commercial Service 2009a). The stability and safety in politic environment was the key success for KFC Vietnam to grow expands its business and become the market leader in Vietnam’s fast food industry. Economic Factors In recent years, Vietnam’s economic growth rate has annually increased at 7 to 8. 5 percent and has been one of the highest in the world. With the estimated increase in GDP 6. 5 percents in 2009, Vietnam is considered to be a true emerging market for U. S investors.

    In respond to face the high inflation rate, Vietnamese government implemented a monetary tighten measures to stabilize the Vietnamese Dong, cutting government expenditures in order to slow inflation (U. S Commercial Service 2009a). According to the market research company Nielsen estimated the fast food industry in Vietnam could grow by 40 percents and generate VND500 billion (Tuoi Tre 2009). With advantages on economic environment, KFC Vietnam has many opportunities to develop its market share, increase profits and expand number of restaurants to 80 (ITPC 2008).

    Socio-cultural Factors Due to the rise of fast food in Vietnam and the change in eating habits of Vietnamese people, they were busier than ever before so they tended to eat fast food more often than traditional meals (Vietnamnet Bridge 2008). KFC always concerned about the social, cultural and ethical values of local community. Its restaurants had done product adaptation in order to suit local tastes, cultures and religion in Vietnam. This gave KFC an opportunity to grow and increase profits in Vietnamese market. Technology Factors

    KFC always support the work of research & development in order to introduce the new technology. It used latest technology on machines and boilers with technical checkup and maintenance every six months. It made the cooking become faster to order and reduced the serving time. KFC Vietnam also use online website to provide customers another tool for ordering via phone. In the future, customers may also purchase KFC products and perform online transactions (KFC Vietnam 2008). 2. 2 Porter’s Five Forces Threat of new entrants (Strong)

    Recently, Vietnamese government has applied Commercial Law that encourages foreign franchises coming to Vietnam market. Costs for establishing location, buying furniture etc. are not very high. Because the awareness of American franchise businesses is strong, many Vietnamese businesses interested in taking possession to operate American franchises (U. S Commercial Service 2009b). The American’s potential new entrants could enter Vietnamese market are McDonald’s, Carl’s Jr, Burger King, Taco Bell, Subway and etc. Bargaining power of suppliers (Moderate)

    The suppliers in Vietnam had moderate bargaining power. KFC Vietnam took the supply of fresh and quality chicken meat from Thai-invested CP Viet Nam Livestock Company and Long Binh which is a joint venture with France (ICARD 2004). KFC started helping local suppliers with technological support to improve their product. The strong relations between KFC and local suppliers lowered supplier bargaining power. Bargaining power of buyers (Moderate) The bargaining power of buyers in Vietnam is moderate and they have varying degree. Individual buyers are less powerful because they purchase in small items.

    A buyer for occasion such as birthday party is stronger with the demand for more service and additional promotion like invitation card and discount price. Threat of substitute (Strong) Substitute competitors of KFC are all small restaurants that offer food service. The threat is strong with the variety in kinds and traditional Vietnamese taste such as Pho Hoa or Com Tam Moc. KFC needs to lower this threat by enhancing its promotion in order to popularize products so that the consumer will purchase KFC rather than other substitute products.

    Competitive Rivalry (Moderate) Threat of direct competitors is moderate because KFC is the market leader in Vietnam with 75 restaurants. There are two main competitors: Lotteria and Jollibee (KFC Vietnam 2008). The threat may rise in 2010 because Lotteria will increase their restaurants to 80 outlets. Regarding to this competition, KFC also plans to growth total restaurant to 100 units and recently enhances their service by cutting short its delivery time to less than 30 minutes (Look At Vietnam 2008). 2. 3 Competitor Analysis Direct competitors: Lotteria and Jollibee

    Indirect competitors: Pizza Inn, Kinh Do Bakery, Duc Phat Bakery, Tour Les Jour. 2. 4 Market Segmentation According to Kotler et al (2005), there are four variables which can be used to segment the consumer market. In case of KFC, we considered four variables which are: • Geographic segmentation • Demographic segmentation • Psychographic segmentation • Behavioral segmentation Geographic segmentation This segment is used to divide a market into different geographic units such as cities, regions or neighborhoods (Kotler et al 2005). World Region |South East Asia | |Country |Viet Nam | |City |Ho Chi Minh City, Ha Noi, Da Nang, Hai Phong | |Density |Urban | |Climate |Not specific |

    KFC Vietnam used geographic segmentation in order to mainly allocate the restaurants in big cities which have a large population such as Ho Chi Minh City, Ha Noi, Da Nang, Hai Phong. HCM city and Ha Noi has been selected as two main market of KFC Viet Nam with 45 restaurants (HCM city) and 19 restaurants (Ha Noi). Currently, consumer purchases are strongest in Ho Chi Minh City. Consumers in the South also tend to exhibit a greater degree of brand awareness than people in the North and Central regions (U.

    S Commercial Service 2009c). This can explain why KFC has numerous restaurants in HCM city rather than in Ha Noi and other cities. With the purpose of long-term developing in Vietnam market, KFC firstly focus on the center of North and South of Vietnam then gradually open the its entire network to other regions. Demographic segmentation The purpose of this segmentation is used to divide the market into groups based on demographic variables such as age, family size, income, occupation and so on (Kotler et al 2005). |Age Adults : 17–29 Children: 4–14 | |Gender |Both Males and Females | |Family Size |1-2, 3-4, 5+ | |Income |Above 5 millions VND/month | |Occupation |Students, young officers |

    KFC Vietnam focuses in these following variables: Age segmentation: KFC concentrated on young people from the age between 17 to 29 years old, family has children. Young people are energetic to adapt the fast food trends and the ability to purchase fast food meals a few times a week is absolutely possible. Moreover, KFC Vietnam is also paid attention to children from 4 to 14 years old. Income segmentation: Vietnam is among countries which having low GDP per capita so that this is one of the difficulties for KFC penetrates to Vietnam’s fast food industry.

    People with medium income (more than 5 millions VND/ month) are a main segment that KFC want to focus because the abilities to eat fast food of these people are more frequent. However, people with low income are also customers of KFC but the chance for them to go to KFC restaurants is not usual. Occupation segmentation: By choosing HCM city and Ha Noi are two main big cities where there are great numbers of universities, schools and colleges so KFC can interact with a big market consists of students, pupils and young people who work in downtown areas and usually go to KFC restaurants to have meals.

    Psychographic Segmentation |Social Class |Middle class and High class | |Life Style |Western | |Personality |Not specify |

    Vietnam is one of countries which having a rapid growth in GDP. The Western-style fast food is now excitedly welcomed in Viet Nam and is adopted quickly by the young people (Tran 2008). Vietnamese lifestyle will be influenced by the culture of Western where was the original hometown of fast food. This is the reason that KFC believe Vietnam is a potential fast food industry to develop. The social class that KFC want to attain is middle class and high class. Behavioral Segmentation Occasion |Regular occasion | |Benefits |Food, service, ambience, price | |User Status |Regular users and first time users | |Loyalty Status |Medium and Strong |

    According to Mr. Ponchi Torato (KFC Country Director, Vietnam), KFC had done survey based on consumer knowledge, attitude and it received good respond from customers. KFC Vietnam is evaluated as a very good service, good food, food hygiene, good ambience and reasonable price (National Public Radio 2009). Therefore, KFC introduced professional styles from staff to services in order to bring the best to customers. 2. 5 The Product Life Cycle Analysis INTRODUCTION GROWTH MATURITY DECLINE [pic] PROFIT TIME

    Due to the presence in Vietnam 10 years ago, KFC has been considered to be in the beginning of maturity phase. From 1997 to 2005, KFC suffered losses for 7 years and it just began to get profit in 2006. KFC is at the last phase of growth due to their expanding in geography from the South West to North of Vietnam (KFC Vietnam 2008). They tend to begin and continue to grow in maturity phase with the leader position (Vietnamnet Bridge 2006). Therefore, KFC still develops and earns profit although it is in maturity phase. 2. BCG Matrix Analysis HIGH GROWTH RATE LOW LOW HIGH LOW MARKET SHARE According to BCG Matrix Analysis, KFC is placed in the Cash Cow. This can be explained by the high market share of KFC with 75 restaurants in Vietnam but the market growth was still low. From 2006 until 2009, KFC started turning in profits and expanding the network to other provinces such as Vung Tau and Dong Nai to gain the market growth. With long term strategy, KFC will be a star in Vietnam’s fast food industry. 3. SWOT and issue analysis 3. 1 SWOT analysis Strengths |Weaknesses | |Secret recipe |Not cover widely in other provinces | |Brand name |High price | |Good food quality |Staff quality | |Prime locations | | |Quick processing time | | |Variety in menu | | |Sophisticate revenue | | |Opportunities |Threats | |Fast growth of 15-24 age group |Strong competition in Vietnam | |Rise of fast food trend |The threat of new entrants | |The increase in Vietnamese income |Bird flu disease | | |The increase in government taxes | | |High inflation | 3. 1. 1 Strengths • KFC has secret recipe consists of 11 herbs and spices that make KFC become the most famous fast food brand worldwide (KFC Vietnam 2008). • KFC has been known as a strongest international brand name in Vietnam’s fast food industry for over 10 years with its widespread network (The Saigon Times 2009).

    This is very important to customer loyalty and is pivotal to the success of the franchise. • The food quality is a main key strength to KFC. Its quality is defined by the Yum! Brand and controlled by the local franchises. The raw material that supplied from local suppliers, met a global standard for quality meats. • KFC has a large number of restaurants in prime locations such as 45 restaurants in HCM city (17 restaurants in District 1 and 5 in district 3) and 19 in Hanoi (KFC Viet Nam 2008). Moreover, KFC Vietnam mainly aimed to open restaurants at supermarkets and trading centers. With good locations, KFC’s marketing and activities/PR has been very strong (Kotler et al. 005) • The processing time for KFC recipes is very quick that brings more comfortable to customers. • KFC is ranked as the highest among all chicken restaurant brands for the convenience and variety in menu with Vietnamese traditional meals – rice. • KFC has sophisticated financial revenue which is support by Yum! Brands. 3. 1. 2 Weaknesses • KFC restaurants chains have not covered widely in Vietnam. It only concentrated on large cities especially focused too much on HCMC (45 in total of 75 restaurants). • KFC price is still high for the average income of Vietnamese people especially for those who come from other provinces. • KFC needs to pay more attention to improve the staff quality by offering more training. 3. 1. 3 Opportunities Fast growth of 15-24 age group in Vietnam’s demographic which is the main target segment of KFC (Figure 1) • The rise of fast food trends in Vietnam market (CommonDreams 2009) • The increase in the Vietnamese income especially in HCM city and Ha Noi(Figure 2) 3. 1. 4 Threats • The threat of strong competition in Vietnam’s fast food industry. There are many competitors such as Lotteria, Jollibee, Pizza Hut and they will increase their service, quality of food and expand their market share. • The threat of new entrants of American fast food chain such as McDonald, Taco Bell and Carl’s Jr is going to enter Vietnamese market. • The competitor may intimate the way that KFC render their menu with more traditional Vietnamese food to keep up the trends. • The potential threat of bird flu especially in Vietnam that caused the increase in raw materials.

    This can lead to the drop in profitability of KFC. • The government taxes for franchising can increase each year. 3. 2 Key Successful Factors KFC’s key success factors are the strong brand name, the secret recipe and operating in good prime locations. These sustainable competitive advantages made KFC become the market leader in Vietnam fast food industry. 3. 3 Issue Analysis In this section of marketing plan, SWOT analysis is used to define the main issues that the plan must address. The company must consider the following basic issues: ? Should KFC Vietnam expand the market share by increasing the number of restaurants in HCM city, Ha Noi, Vung Tau, Can Tho and many other regions? Should KFC Vietnam invest more budgets for advertising and promotional activities to growth its business brand name? ? Should KFC Vietnam focus on the children target market by creating more children programs? 4. Objectives After defining issues in the product line, KFC Vietnam must decide on the plan’s objectives. KFC’s marketing objectives are: ? To increase the number of KFC’s restaurants from 75 at the present to 100 restaurants in 2010 ? To develop the children programs by introducing 20 kindergarten corners in KFC restaurants. ? To increase the revenue 20% compare with 2009. 5. Marketing Strategy Appendix Figure1[pic] Figure 2 [pic] Reference CommonDreams. rg 2009, Vietnam: Rise of the New Fast Food Nation, viewed 30 December 2009, . Entrepreneur Media 2009, KFC Corp Chicken, Entrepreneur, viewed 27 December 2009, . GoodLand Informatics 2006, Project Portfolio, viewed 29 December 2009, . ICARD 2004, City customers crave chickens and eggs, viewed 29 December 2009, . ITPC 2008, Foreign giants dominate fast food market, viewed 29 December 2009, . Kotler, P. Armstrong, G. Hoon Ang, S. Meng Leong, S. Tiong Tan, C. K. Tse, D. 2005, ‘Market Segmentation, Principles of Marketing – An Asian Perspective, 10th edn, Prentice Hall, Singapore, pp. 193-196. Kotler, P. Armstrong, G. Hoon Ang, S. Meng Leong, S. Tiong Tan, C. K. Tse, D. 005, ‘Retailing and Wholesaling’, Principles of Marketing – An Asian Perspective, 10th edn, Prentice Hall, Singapore, pp. 364-366. KFC Viet Nam 2008, Store List, viewed 30 December 2009, . Look At Vietnam 2008, When fast food is localized, WordPress & Skin, viewed 1 January 2010, . National Public Radio 2009, KFC Brings Tasty Treats to North Vietnam, viewed 30 December 2009, . The Nielsen Company 2007, ‘Consumer Fact Pack’, Acnielsen. com The Saigon Times 2009, When fast food is localized, Mat Bao Company, viewed 30 December 2009, . Tran 2008, Saying no to KFC, Vietnam News Agency, viewed 1 January 2010, . Tuoi Tre 2009, Foreign giants dominate fast food market, Moore Cop, viewed 27 December 2009, . U.

    S Commercial Service 2009a, ‘Market Overview’, DOING BUSINESS in VIETNAM: 2009 COUNTRY COMMERCIAL GUIDE for U. S. COMPANIES, March, pp. 2. U. S Commercial Service 2009b, ‘Franchising Overview’, DOING BUSINESS in VIETNAM: 2009 COUNTRY COMMERCIAL GUIDE for U. S. COMPANIES, March, pp. 76. U. S Commercial Service 2009c, ‘Market Segmentation’, DOING BUSINESS in VIETNAM: 2009 COUNTRY COMMERCIAL GUIDE for U. S. COMPANIES, March, pp. 18. Vietnamnet Bridge 2006, KFC exec speaks on the growth of fried chicken, viewed 1 January 2009, . Vietnamnet Bridge 2008, The rise of fast food, viewed 29 December 2009, . ———————– STAR CASH COW QUESTION MARK DOG [pic]

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