Kfc Case Analysis

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Register to read the introduction… 7.0 Justification of Recommendations

As a short term strategy, KFC should focus on sustaining its position in the Mexico and the Caribbean regions. These two areas are in close proximity of the United States. Comparatively lower transportation costs, less communication and operational problems. This enables KFC to operate mainly company-owned restaurants. There can be some advantages of franchising; however control is harder to maintain, KFC has been, for the most part, unsuccessful with them in the region. With its company owned restaurants, on the other hand, issues such as restaurant cleanliness and service levels can be maintained.

KFC has already had unsuccessful franchised restaurants in Argentina. In this situation, quality of the products sold in the franchises faded, the products did not match the quality featured by the parent company, and profit margins declined. Furthermore, Argentina¡¦s economy declined which led KFC to fold its operations there in less than a
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This is particularly important in countries such as Chile where tastes differ significantly to the US.

The costs in establishing themselves in other Latin American countries will be higher than in Mexico. Competitors such as McDonalds and Wendy¡¦s already dominate these markets, therefore marketing costs will be comparatively high.

No doubt, there can be first-mover advantages in entering other Latin American nations. Nevertheless, there is also a great deal of risk with this strategy. While the advantages of being the first mover is increased revenue and potential market dominance, the downside is that a company may suffer losses in the short term.

As a long term strategy, KFC can create a management hub in the Latin American region to oversee operations of franchises in those countries. The non-tariff and free-trade agreements would only ease the management of these franchises.

To deal with US market saturation and rising costs, KFC has already begun implementation of a plan to multi-brand with ¡§2-in1¡¨ units. In the domestic market, KFC should have a short term focus on the expansion of its ¡§2-in-1¡¨
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Economic and political instability create an environment that can change very quickly. It is a region which requires development, but KFC must be cautious. KFC is already a leader in Mexico and the Caribbean, but they are not leading expansion into markets like Brazil, Venezuela, and Argentina. The uncertainty in these countries is high. KFC has a successful franchise program and should implement this in Latin America in conjunction with a small percentage of company owned restaurants. This strategy will take advantage of the Latin American market through franchise fees while being able to establish some control over the franchises through small numbers of company-owned

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