The Comparative Analysis Of KFC’s & McDonald's Value Chain Essay

Analysing KFC’s value chain

Franchise agreements

Agreements that sell a product or service made by another company or legally allowing a business to operate using the name of another company.KFC operates using a franchise system where the franchisor grants differs amounts of independence to the franchisees to use the brand name and also gain from franchisor’s marketing. KFC stated that with their franchise partners around the world, they have become one of the fastest growing retail brands.

Reputation

Any company that gets involved with their community and uplifts it will increase its reputation and engage customers and investors.KFC have committed themselves to aiding communities through Add Hope, a program that was created to help end hunger around the world through fundraising and local hunger organisations. In South Africa, customers can donate R2 (or more), which goes into the Add Hope Trust (along with KFC’s donation) and is then donated to over 138 charities in South Africa which is used to provide nutritious meals and feeds 120 000 children.

KFC has a strong international reputation and they position their stores very specifically to ensure utmost effectiveness for everyone involved with the company. KFC has located various branches within Cape Town which allows easy access and saves travel costs for their suppliers and customers. KFC’s value has increased even more due to their menu. KFC provides only chicken products within their restaurants. The company has developed a menu that consists of a key product – chicken – which makes the operation more straightforward from both the business and supplier since it is used and sourced from the supplier.

Trademarks

This legally prevents other people or companies from using a business’s name, logo or other branding items. It is a design, symbol or a logo used to identify with a particular product or a business.Trademarks such as “KFC”, “It’s finger lickin’ good”, “So good” or any references to Colonel are very well known and easily recognisable so if another business were to copy any of the previously mentioned, it would be illegal and wrong to do and will therefore face consequences. These trademarks are used to distinguish KFC’s quality products and are protected from replication. Unless noted, they are not to be copied, spread, displayed or transferred without KFC’s permission.KFC’s mission: To sell food in a quick, companionable environment that appeals to pride responsive, health minded consumers.

Tangible resources

Real estate: Restaurant development is one of KFC’s key components of their growth strategy. Overall, KFC is committed to consistent growth and each franchise is responsible for their own real estate and construction. They must also provide customers with the most convenient and desirable restaurant locations across the country and should include drive throughs and site qualities (high visibility, easy access etc) to further attract customers.

Infrastructure

KFC’s structure has been cleverly designed and its uniform structure adds value to the company, as well as its well trained staff. Internationally, its infrastructure is captivating internally and externally and is made further attractive due to some of its characteristics like; playgrounds for children, satisfying quick service, bearable lighting, comfortable seating and welcoming atmosphere.

Human resource management

The human resource management mostly concentrates on managing the issues in cultural diversity. The team communicates effectively and learns how to have a better understanding of the various cultures of the globe since people in different areas and of different cultures have unlike taste. Thus their main principle is to not only create a strong image but to also serve the best interest of diverse customers all over the world.

Technological development

KFC uses technology so that they can save costs for operational management and utilise two value adding systems that will benefit the company. KFC’s eye catching website is another value adding factor to the company and it allows for all of the customers to access it. On their website, KFC provides all of the company’s information from their products to their history. It also has information about their products nutritional benefits and how they contributecto a health conscious society.

Analysing McDonalds’ value chain

Franchising

Numerous McDonald’s restaurants are franchised to entrepreneurs who operate under legitimate arrangements with the company. The McDonalds franchise is the world’s leading fast food service retailer by revenue. McDonald’s method of purchasing allows for the franchise to ensure maximum productivity. This means that raw materials are bought in only from their fixed supplier and of raw vegetables and other raw materials. The fast food company relies upon numerous independent suppliers that are required to meet and maintain the company’s high standards and specifications but it can also implement backward integration which gives them the opportunity to replace many of their suppliers. It would have been introduced for reasons like reducing costs and to make sure that their standards are continuously being met.

Reputation

Most of business owners do not have enough understanding of how their company’s reputation impacts the value of their business.Successful businesses must be aware of their customers and reputation since they are key ingredients to becoming more successful. McDonalds is successful due to the way that they manage their resources. My statement can be proven by knowing that the better you manage the intangible resources in your business, the higher premium you will receive upon selling your business.

The fast food company is also known for its CSR programme, Rounda Campaign, which also increases their reputation and customer loyalty.The Rounda Campaign strives to fight hunger relief in South Africa. This campaign relies on customers to add a Rand to their purchase and it will be donated to the Nikela Charity Funding and Development Trust. The funds raised from Rounda will also benefit McDonald’s House of Charity and will continue to contribute to families of critically ill children treated in hospitals.

Trademark

They have enormous value to businesses and they are adopted by the business in order for them to differentiate in the market. A trademark visually sets a company or its products apart from its competitors in the market to gain market share.McDonald’s Golden Arches are the best example of a symbol trade mark and are known to be one of the most recognisable logos in the world. These arches were originally part of the restaurant design, which resembled a conformed restaurant, and now resemble an ‘M’ for McDonalds. McDonalds Mission: For their customers’ favourite place, to eat and drink, to be McDonalds. They are driven to continuously ameliorating their operations and elevate their customers’ experience.

Tangible resources

Real estate: Real estate often increases in value over time which is something that McDonald’s can and has taken advantage of. Real estate values have increased, over years, which means the overall value of the company’s property has increased, too. So, for example, when McDonald’s wants to borrow money to make new investments, it can do this at cheaper rates than normal.McDonald’s makes much of its revenue by buying the properties and then leasing them to franchisees, rather than collect it in royalties like, for example, selling its franchisees cooking equipment, supplies or machinery. It is like McDonalds has become more of a real estate company than a restaurant chain.

Infrastructure

McDonalds has made use of modern infrastructure with advanced IT and have continued to carry out green activities. McDonalds have invested in many sustainability measures recently, all of which have been successful. Enhanced recycling efforts have helped control disposal costs and their overall efforts are reducing McDonald’s environmental impact and by 2025, 100 percent of their packaging will be recycled and the company will continue to work with environmental organisations. A steel frame restaurant was introduced in Cape Town and Pretoria which means that these particular McDonalds restaurants are sustainable buildings that are environmentally friendly and consume less energy.

Human resource management

McDonald’s offers a position of work to workers who are marginalised within the labour market and to employees who seek for a job that can accommodate to flexible work hours, since they could be engaged with other activities.The use of flexible working practices within McDonalds’ will be helpful in keeping the employees motivated and meeting targets and therefore driving the company towards achieving their goals. McDonalds’ practices are based on recruitment and selection, employees, rewarding and recognition – to improve and motivate their work performance.

Technological development

The company will mainly focus on modernising their franchises, for example, change their products on the menus. So, which company is more successful?After investigating both KFC and McDonald’s Value Chain Analysis, I can deduce that McDonalds is the more successful fast-food chain restaurant. At McDonalds, there is a variety of products that accommodates for many different tastes and cultures. Their menu consists of products such as chicken, beef and there are even fish options. Their extended range of products attract a larger consumer base.McDonalds is more of a ‘24-hour easily accessible’ outlet than KFC which is what makes it a great place to have your meals, at any time of the day, and it is more convenient due to the accessibility and unrigid restrictions.

They focus on market saturation, and have located numerous restaurants in well- known places, making them even more accessible and aware to customers. There are over 60 outlets throughout the Western Cape, overtaking the amount of KFC outlets in Cape Town. McDonalds has also adapted well to their consumers’ needs by, for example, implementing international self-ordering facilities and also adding healthier items to the menu, which unlocks new market potential.

There has been more focus on advertising the brand, McDonalds, and keeping consumers aware and interested of change within the restaurant, like new products and promotions. Even though KFC has these aspects too, I believe that they are better practised within McDonalds which proven through their success rates.Through a survey that I made, the majority of the people that I surveyed voted for McDonalds to be the most successful, which matched my secondary research.

How can KFC improve?

In order for KFC to improve their business, they should assess McDonalds’ strengths. KFC can implement the growth strategy for product development. There are various ways to find new customers but it is important to have a clear understanding of the market, for example, consumer’s needs, behaviour and characteristics. This process would involve conducting qualitative or quantitative market research to discover elements that KFC might not have been aware of. KFC will have to provide a new product into their already existing market and do market research before- hand.

They could decide to introducing vegetarian products onto the menu since vegetarianism is an internationally growing trend. This opens market opportunities to a wider range of people since KFC only offers chicken products. They could launch an app that allows customers to avoid waiting in line at a register and simply pay in advance and pick it up at a counter that is designated for digital orders. Since time is essential in a fast food company, the app would be a good solution for speeding processes up.

KFC could also introduce more promotions since it draws in new customers and average transaction – or even adopt the up-selling or cross-selling techniques since they also add value to the purchasing process. KFC should place more focusing on advertising and promoting their new products which will eventually expand the business’ market share. Partnering with other brands to increase sales is another tactic to use.

KFC, for example, could partner up with Simply Asia which will cause for their menu to be more diverse and it will also create convenience for customers KFC should ensure that their store appearance looks inviting should revamp the store every few years to ensure that it looks and feels up to appropriate standard.S

taff selection and training should be managed well since staff are the face of the company. KFC staff should be able to add value to customers’ experience and satisfaction. They could even make ensure their customers that if they are not satisfied with the products that KFC are offering, they will not have to pay or can come up with solutions. By having a good customer service guaranteeAfter evaluating McDonalds’ strengths, KFC could even overtake the number one fast-food chain restaurant if they use and practice the certain strategies and techniques properly.

References:

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