Kentucky Fried Chicken is the world’s largest chicken restaurant chain and the third largest fast food chain. It operates in 74 countries and territories throughout the world. Started in 1964 by Colonel Sanders, this company experienced impressive domestic growth in the decades that followed. However, as the US market matured, Kentucky Fried Chicken has had to look to high growth international markets to increase its sales.
At present, this company is still pursuing these types of markets. One of these is Latin America. In looking at this region, the question that KFC needs to address is what should its strategy be. Some strategic choices are as follows: 1) Should it focus on sustaining its position in Mexico and the Caribbean and postpone plans to expand into other large markets like Venezuela, Brazil, and Argentina? 2) Should it invest more capital into these large markets to challenge existing competitors? 3) Should it focus on building a franchise base throughout Latin America, in order to build KFC’s brand image and prevent competitors from establishing first mover advantages? Of the choices listed above, it is the contention of this paper that, based on the information given in the case study and other supplemental information, Kentucky Fried Chicken should stay focused on its position in Mexico and the Caribbean. There are several reasons this conclusion was drawn. First, these areas are in close proximity of the United States, and this will enable Kentucky Fried Chicken to operate mainly company -owned restaurants.
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While there can be some advantages of franchising, because control is harder to maintain with these types of restaurants, Kentucky Fried Chicken has been, for the most part, unsuccessful with them. With its company owned restaurants, on the other hand, things such as restaurant cleanliness etc. were maintained. Something that supports this point is the fact Kentucky Fried Chicken 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 Kentucky Fried Chicken to fold its operations there in less than a year. Another reason it should stay focused on its position in the Mexican and the Caribbean is because this market is not saturated and, by a number of indications, Kentucky Fried Chicken is doing well in these locations. One source quotes that KFC outlets in Mexico on average have sales 63 percent higher than U. S. branches. (Leb har-Friedman, Inc) Furthermore, this source goes on to day that the Mexican market is one of the chain’s most profitable on a per-restaurant basis.
Lastly, Kentucky Fried Chicken should stay focused on its Mexican and Caribbean markets because the political and economic conditions of the other Latin American countries, for the most part, are too unstable. Granted, McDonalds is gaining first-mover advantages in countries like Brazil, however, McDonalds is having a lot of problems with its franchises there. No doubt, there can be first-mover advantages. Nevertheless, there is also a lot 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 could really suffer a loss. From my analysis, Kentucky Fried Chicken, in this case, should stay in Mexico and the Caribbean and play it safe.