Introduction

In this report will provide knowledge about business strategy and tools to understand and
analysis forces that affected to company. Models and factors that companies have to concern in
order to sustainable develop in marketplace. Its also helpful for people to adjust companys
strategy suitable and gain more potential profit. In this report will use KFC Corporation as an
example. KFC Corporation is an American fast food chain restaurant that best known with fried
chicken. Currently KFC available in more than 25 countries with more than 20,500 outlets.

Task 1.1 Introduction about vision, mission and core value of chosen
company
Mission: KFC is one of the best known fast food chains in the world who want to be leader of
fast food market. With main ambition to increase and maintain the quality in fast food industry
and capture the fast food market, KFC had expanded branches over the world. They want to be
the leader in service fast food chains in ASEAN with consistency quality of products and perfect
customer services.

Vision: As a restaurant KFC passion is to put YUM on peoples faces around the world, satisfy
customers every time and doing it better than any others. As a company KFC wanted to
improve shareholder value annual, maximize profits and sustainable development.

Core Value: Unique taste, friendly service, wholeheartedly for customers and warm and cozy
atmosphere at the restaurant are there key keys to KFCs successful door in Vietnam as well as
in the world. KFC Vietnam has created a new culinary culture and contributed greatly to the
development of the fast food industry in Vietnam.

- Food Promise: KFC promise to provide to customers the worlds best chicken. Chicken
are inspected USDA for quality before delivery to KFC kitchens. The threat of resistance
to human antibiotics is a rising public health concern in over the world. Offering chicken
raised without medically important antibiotics is the next step in food promised to
customers. BY the end of 2018, all chicken purchased by KFC U.S will be raised without
antibiotics important to human medicine. All KFC chicken and 92% of food in the menu
are free of food dyes. By the end of 2017, all of food in KFC menu will be free of food
dyes (with the exception of beverages and third-party products.

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 - Diversity: Diversity not just a philosophy, at KFC it is a part of How We Work Together.
KFC developing a workforce that is diverse in style and background, where everyone can
make a difference.

- Animal Welfare Program: Yum! Brands Inc., parent company of KFC is committed to
humane treatment of animals.

Task 1.2 + 1.3 Models and tools need to concern in strategy planning.
Applying models to chosen company.
Strategy Planning
Strategy planning is process of decisions made by organization and outline course to achieve
goals and develop the business. There are 6 models that manager need to concern when
planning strategy: Supply Chain, Porters 5 forces, PEST, BCG Matrix, VRIN and SWOT.

Supply Chain (Internal environment analysis)

Definition: Supply chain is a network between customers and consumer included manufacture
and distribution products. A supply chain also represent requirement for product or services to
approaches customers. Optimized supply chain can reduce cost and increase productivity,

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especially in manufacture that required component part supply chain can reduce cost and
complexity.

Supply chain can understand as the flow of material, products, information from creating
products, services, manufacture and distribute to retailer and customers. A supply chain also
included functions such as development, marketing, operating, distributions, financial and
customers services in order to receive and fulfill customers requests. A company is a supply
chain and supply chain is the most intangible asset of a company.

KFC available in Vietnam since 1997, currently KFC Vietnam had extended to 19 cities and
provinces with more than 140 restaurants. With more than 140 restaurants in 19 provinces KFC
had cooperate with some partner to supply raw material to ensure food safety, avoid and
reducing risky in running the business. Example: KFC cooking oil are supplied by Neptune Gold,
tomato, lettuce, cabbage and cucumber are grown at Da Lat with high technology process that
meet the standard of VietGAP. Chicken are supplied by scale farm of trusted company such as
CP, Unitech or Long Binh in vacuum packages and cold brewing before distributed to nearby
stores.

Porters 5 Forces (Micro external environment analysis)

Definition: A model that help people to identify and analysis five competitive forces that shape
every industry and provide knowledge about strength and weaknesses of company and industry.
Porters 5 Forces can be applied to any segment of economy to search profitability and
attractiveness. There are 5 forces which is frequency used to measure competition intensity,
attractiveness and profitability of an industry or market.

- Direct Competition: This is about the rivalry among existing competitors, number of
competitors and their ability to threaten company. The larger number of competitors

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 along with the number of equivalent product and services they offers represent the
power of a company. This is the major force determine competitive and profitability of
an industry. Aggressive complete with others competitors can lead to low profits.

Rivalry among competitors is intense when:

Many competitors will increase rivalry in market share and customers resources.
The industry growth slow or negative.
Low switching costs can cause of increase rivalry. When customers can easy and
feely to switch from one product to others it can create the chance for other
competitors to capture customers.
High exit barriers place a high cost on abandoning the product. High exit barriers
cause a firm to remain in an industry even when the venture is not profitable. A
common exit barrier is asset specificity.
Low level of product differentiation. Products are not differentiated and easy to
substituted will lead to higher levels of rivalry.
Low customer loyalty also can give the chance for others competitors capture
customers.

In order to competitive with other competitors and gain more market share company
need to have its competitive advantage. Such as:

Changing prices: Raising or lowering prices to gain temporary advantage.

Improve product differentiation: improve or added new feature, innovation on
manufacture process and products.
Changing and creative in distribution: Company can use a distribution that is novel
to the industry.
Exploiting relationship with suppliers: Company can set higher quality standard and
required suppliers to meet its demands for products specifications and price.

Fast food markets are intensity of competitive. There are some intense competitors that
KFC are facing such as McDonalds, Burger King or Popeyes Chicken. KFC had developed
mechanisms to tracking competition.

Indirect Competition: In this concept substitute products refer to products in other

industries with the same facilities or services. A products price elasticity is affected by
substitute products as more substitutes become available, the demand becomes more

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 elastic since customers have more alternatives. Substitute products can be available in
any industry. In this case company can improve, update new technology or refer to
offers new products to have other income sources. The more products that continue to
appear, the higher chances your customers will be drawn to an alternative from their
usual choice. To confront this, company should consider:

How many substitute products to company products.

Is there any perceived level of differentiation?
Buyers switching cost.
How easy to switch choice.
There are many other choices for people to have lunch or dining with family, friends. To
increase sell volume and competition KFC had launched promotion for lunch time,
family sets or deals member card.

- Potential Competition: This concept is about threat of new entrants in the industry
which is easy to join in, diversity and unlimited supplier. In this case industries possess
characteristics that protect the high profit levels of the firms in the market and inhibit
additional rivals from entering market. Barriers to entry are unique industry
characteristics that define the industry. Barriers reduce the rate of new company thus
maintaining a level of profits for those already in the industry. From strategic
perspective, barriers can be created or exploited to enhance a firms competitive
advantage. The threat of new entrants can be lowered or even can be blocked by the
largest companies that somewhat of a monopoly over the industry. People will need to
consider:
Are there many entry barriers? High entry and low exit barriers makes for an
attractive industry. Entry barriers may include right, patents, technology protection
etc.
The loyalty of customers with company.
Specialist knowledge or function that can be used to differentiate company.
Evidence of economies of scale in play in companys industry.
Government policy in place to either encourage or discourage new entrants.

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 Although the fast food chain market is difficult to penetrate due to many competitors,
KFC are receiving stiff competition from Five Star Chickens which has become more
popular in Vietnam.

- Power of Supplier: Every company have it suppliers, whether raw materials, knowledge
support or physical staff labor. Strong bargaining power allows suppliers to sell higher
price or low quality raw material to their buyers. This directly affects the buying firms
profits because it had to pay more for materials. Suppliers have strong bargaining power
when:
There are few suppliers but many buyers;
Suppliers are large and threaten to forward integrate ;
Few substitute raw material exist;
Suppliers hold scarce resources;

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 Cost of switching raw materials is especially high.

C.P Company is the agency supply chicken for KFC Vietnam and KFC also have it farm to
supply raw material for KFC restaurant all over national.

- Power of Customer: When buyers have power they can apply pressure to company in
order to negotiation for better deals. If buyers have many choices of products and
companies then their power is high. If buyers decide to join together so that a large
portion of the market share is putting pressure on company then they also have high
power. Company should consider:
Quantity of buyers.
Sensitivity price of buyers.
Information, knowledge about companys buyers.
Differentiates from company with others competitors.
Buyers have the power to demand lower price or higher product quality from industry
producers when their bargaining power is strong. Lower price means lower revenues
for the producer, while higher quality products usually raise production costs. Both of
them will lead to result in lower profits for producers. Buyers have strong bargaining
power when:
Only few buyers exist;
Switching costs to other supplier are low;
Many substitutes;
Buying in large quantities or control many access point to the final customer.

PEST Model (Macro external environment analysis)

PEST is an acronym for Political, Economic, Social and Technological external factors that
commonly affected business activities and performance. PEST model was created by Harvard
professor Francis Aguilar in 1967; PEST can work alone or be used in combination with other
tools such as Porters Five Forces and SWOT analysis to determine organizations overall
outlook.

- Political Factor: This factor is about government regulation and legal issues and defines
both formal and informal rules that affected to business environment and trade market.
Such as:
Tax policy
Employment laws
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 Environmental regulation
Trade restrictions and tariffs
Political stability

- Economic Factor: It affected purchasing power of potential customers and the firms
cost of capital. This would include:
Economic growth
Interest rates
Inflation rate
Exchange rates

- Social Factor: Include the demographic and culture aspects of the external macro
environment. These factors affect customer needs and the size of potential markets.
Some social factors:
Career attitudes
Population growth rate
Age distribution
Health consciousness
Emphasis on safety

- Technology Factor: technological factors can lower barriers to entry, reduce minimum
efficient production levels, and influence outsourcing decision. Technological factors
include:
R&D activity
Automation
Technology incentives
Rate of technological change.

BCG Matrix (Positioning analysis)

BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic
position of the business brand portfolio and its potential. It classifies business portfolio into
four categories based on industry attractiveness (growth rate of that industry) and competitive
position (relative market share). These two dimensions reveal likely profitability of the business

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portfolio in terms of cash needed to support that unit and cash generated by it. The general
purpose of the analysis is to help understand which brands the company should invest in and
which ones should be divested.

Market growth rate: Relative market share: High market growth rate means higher earnings
and sometimes profits but it also consumes lots of cash, which is used as investment to
stimulate further growth. Therefore, business units that operate in rapid growth industries are
cash users and worth investing in only when they are expected to grow or maintain market
share in the future.

Relative market share: One of the dimensions used to evaluate business portfolio is relative
market share. Higher corporates market share results in higher cash returns. This is because a
company that produces more benefits from higher economies of scale and experience curve
which results in higher profits. Nonetheless, some firms may experience the same benefits
with lower production outputs and lower market share. There are four parts that firms brands
are classified:

- Dogs: Dos represent for competitors who are holding low market share and operate in a
slowly growing market. In general, they are not worth investing in because they
generate low or negative cash returns. Some dogs can be profitable for long period of
time. Strategy choices: Retrenchment, divestiture, liquidation.

- Cash cows: As leaders in a mature market cash cow exhibit a return on assets that is
greater than the market growth rate, and thus generate more cash than they consume.
Such business units should be milked, extracting the profits and investing as little cash
as possible. Cash cows provide the cash required to turn question marks into market
leaders, to cover the administrative cost of the company, to fund research and
development, to service the corporate debt, and to pay dividends to shareholders.
Because the cash cow generates a relatively stable cash flow, its value can be
determined with reasonable accuracy by calculating the present value of its cash stream
using a discounted cash flow analysis.

- Stars: Stars generate large amounts of cash because of their strong relative market
share, but also consume large amounts of cash because of their high growth rate.
Therefore the cash in each direction approximately nets out. If a star can maintain its
large market share, it will become a cash cow when the market growth rate declines.

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 The portfolio of a diversified company always should have stars that will become the
next cash cow and ensure future cash generation.

- Question marks: Question marks are growing rapidly and thus consume large amounts
of cash, but because they have low market shares they do not generate much cash. The
result is large net cash consumption. A question mark (also known as a problem child)
has the potential to gain market share and become a star, and eventually a cash cow
when the market growth slows. If the question mark does not succeed in becoming
market leader, then after perhaps years of cash consumption it will degenerate into a
dog when the market growth declines. Question marks must be analyzed carefully in
order to determine whether they are worth the investment required to grow market
share.

McDonald is able to increase the food development is high enough and the brands image is
strong enough capture almost the market share. Thus on BCG Matrix McDonalds are
categorized into Star.

KFC is currently in Cash Cow area. Cash Cows where KFC existing market potential has been
utilized optimally with resources owned by the company. KFC should maintain good condition
and gain more market share.

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Pizza Hut and Texas Chicken are also competitors who can be in Star position. Applying on
analyses using BCG matrix, Pizza Hut and Texas Chicken are in the position of question mark,
still has the potential or great opportunity in investment.

VRIN model (Competitive advantage analysis)

The Resource-Based View (RBV) is a perspective that examines the link between a companys
internal characteristics and its performance. RBV is therefore complementary to the industrial
organization perspective that more focus on external factors in order to determine
performance and competitiveness potential (ex: Porters Five Forces). RBV supporters argue
that company should look more inside the company to find the sources of competitive
advantages instead of looking at the competitive environment. The key concepts within this
view are therefore Firm Resources and Sustainable Competitive Advantage.

Firm resources can be defined as all assets, capabilities, organization processes, firm attributes,
information and knowledge controlled by a firm that enables it to improve its efficiency and
effectiveness.

Resources are often classified into categories such as tangible (ex: equipment, machinery, land,
building and cash) and intangible (ex: trademarks, brand reputation, patents and licenses) or
physical, human and organization resources.

This tool was developed by Barney, J. B. (1991) in his work Firm Resources and Sustained
Competitive Advantage. In order for company to transform these resources into sustainable

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competitive advantage, resources must have four attributes that can be summarized into the
VIRN model.

- Value: This is about the ability of a source to add value by enabling a firm to exploit
opportunities or defend against threats. Resources are also valuable if they help
organization to increase the perceived customer value. This is done by increase
differentiation and decrease the price of product. The resources that cant meet this
condition lead to competitive disadvantage. It is important to continually review the
value of the resources because constantly changing internal or external conditions can
make them less valuable or useless at all. For instance: Differentiation in services with
higher price is help McDonald increase perceived customer value what makes people
believed that McDonald is higher value than KFC.

- Rare: Secondly, resources must be rare. Resources that can only be acquired by one or
few companies are considered to be rare. If a certain valuable resources are possessed
by a large amount of companies in the industry, each of company had it capability to
exploit the resources in the same way, thereby implementing a common strategy that
gives none of the companies a competitive advantage. Such a situation is indicated as
competitive parity or competitive equality. In case a company does possess a large
amount of resources that are valuable and rare, it is likely to have at least temporary
competitive advantage.

- Inimitability: Although valuable and rare resources may help companies to engage in
strategies that other firms cannot pursue since the other firms lack the relevant
resources, it is no guarantee for long-term competitive advantage. It may give the focal
company a first-mover advantage but competitors will probably try to imitate these
resources. Another criterion that resources should meet is therefore that they should be
hard and costly to imitate or substitute. Resources can be imperfectly imitable due to a
combination of three reasons:
Unique historical conditions: Choices made in the past influence the options a
company has in the present and future (path-dependency). Similarly, a company
that has located its facilities on what turns out to be a much more valuable location
than initially anticipate has an imperfectly imitable physical resource.
Causal ambiguity: Causal ambiguity exists when the link between the resources
controlled by the focal company and it sustainable competitive advantage is not fully

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 understood. Competitors wont be able to duplicate the focal company since they
simply dont know which resources they should imitate.
Social complexity: If the most important resources of a company are combination of
the strength of its social network, interpersonal relations, a companys culture and
its reputation among both suppliers and customers, it is very hard for competitors to
build an identical social network since it is dependent on so many different factors.
For instance: KFC offers new significant products in order to diversity menu and
avoiding imitate.

- Non substitutability: Other different types of resources cant be functional substitutes.

In this case, commonly company will have their own switching cost on products in order
to make customer confuse with substitute. For instance: KFC target customer are
children with age from 5-15. KFC Vietnam had offers more promotion such as: play
house, toys, gifted in outlets in order to attracted customer and increase loyalty. As
the result, KFC had attractive more young customers and the promotion work as
switching cost. Children prefer KFC with playing area than others.

Conclusion
Business activities are affected by many forces. Through this report people are able to strategic
planning and able to manage strategy by applying Porters Five Forces, VRIN, PEST, BCG model.
This helps people to understand the big picture forces of changes that company are exposing
and take advantage of the opportunity that present.

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