STRATEGIC MARKETING

FINAL PROJECT

Submitted to:
Mr. Khurshid Ahmed
Submitted by:

Ali Murad MB061077

Rizwan Saleem MB063042
Kaleem Ahsan MBE083005
Asif Mahmood MB063031
Azeem Mahmood MB063046
Khalid Mahmood MB063051
Muhammad Umair MB083050

Muhammad Ali Jinnah University

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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.

K
FC Group Members
December
st
21 , 2008
Mohammad
Ali Jinnah University

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TABLE OF CONTENTS:

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EXECUTIVE SUMMARY

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 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
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
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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.

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  KFC open their outlets on reachable places.

 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
.

General Manager
(GM)
Manager

Assistant Manager (II)

Assistant Manager (I)

Shift In-charge

Counter workers

Kitchen workers

Guards

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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.

The pressure cooker is introduced. Soon thereafter Colonel Sanders

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

Kentucky Fried Chicken has more than 600 franchised outlets in the
United States, Canada and the first overseas outlet, in England.

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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.

12/16/1980

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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
 Point of sale displays
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  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

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

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 = 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.
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

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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.
• Beware of expensive ‘turn around plans’.
4. Question Marks (= high growth, low market share)

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 • 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 Required Investment Net Cash Flow
profits
STAR Hold/ Increase High High -or+
Cash Cow Hold High Low High+
Question Mark Increase/Divest 0 or - Very High or High-or+
Disinvest
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
 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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