Strategic Management KFC Holdings Malaysia Berhad PESTEL Case Study

Excerpt from Case Study :

Strategic Management KFC Holdings (Malaysia) Berhad.

PESTEL analysis






Strategic options


A Case Study Strategic Management KFC Holdings (Malaysia) Berhad

KFC Holdings (Malaysia) Berhad is an investment holding company located in Malaysia, whose key vision is to be the leading integrated food services group in the ASEAN region delivering consistent quality products and excellent customer-focused service, its' mission is to maximize profitability, improve shareholders value and deliver sustainable growth year after year, the company's guiding principle are adapted from the Yum! Dynasty Model and is known as the KFCH Dynasty model.

KFCH is in Malaysia's recreation industry and in the restaurant and fast food franchisers sub-industry, through its' network of subsidiaries it has channeled investments in three major segments namely restaurants, integrated poultry and ancillary. The integrated poultry operations include feed mills, contract broiler farming and processing, poultry farms, breeder farms and hatchery and further processing plants. The ancillary support system includes sauce manufacturing, as well as bakery and commissary operations. Statistics from the company show that in the year 2009 the KFCH had a total of forty three RasaMas restaurants in Malaysia and Brunei and thirty five Kedai Ayamas stores across Malaysia, and according to the information from the company's official website, by 1st January, this year the company was operating at least four hundred and seventy five restaurants spread across Malaysia, seventy two restaurants in India, nine restaurants in Brunei and seventy seven stores in Singapore. Another landmark investment for the company was in 15th December, 2009 when it acquired the entire issued and paid-up capital of Rasamas terminal larkin Sdn Bhd and Rasamas Meleka Sdn Bhdd.

According to the industry statistics, the company emerged as a very strong player in the Malaysian corporate world this was after a successful restructuring process which saw the company gain a high reputation for excellent products, efficiently friendly service and huge financial strengths. It also became the biggest employer in the restaurant industry of Malaysia employing over twenty six thousand employees in Brunei, Malaysia and Singapore in addition to that, it is the only company that operates restaurants in the world whose Western Quick Service restaurant market share is greater than that of McDonald's. Important to note is the company's key competitors include Carrols restaurants group Inc., Mc Donald's Corp and Wendy's/Arby's group Inc. (Thomsen, 2004).

External analysis: Pestel analysis

Political factors

KFCH has a vision of being the leading integrated food service group company in the ASEAN and currently operates in four countries namely India, Malaysia, Singapore and Brunei, this therefore means that the company's financial performance will be subject or under the influence of the legislative and political conditions of these four countries and in the future, it will be the entire ASEAN region.

Employment, food and health legislations are the main political factors that majorly affect KFCH Company and with a vision of providing high quality products to client and employing over 26,000 staff the company is keen to observe this legislations hence can't be negatively affected by political factors (Thomsen, 2004).

Economic Factors

Since KFCH operates in the restaurant and fast food franchiser industry the external economic factor are likely to influence its performance in regards to profits, demand, cost and prices. In the market which the company operates in, the main economical factor likely to affect its' operation is the high unemployment in the region, which has a negative impact on the demand for many products. The economic factors can't be controlled by the company hence its' performance is largely dependent on the economic condition of the ASEAN region (Anon, 2004).

Social / Cultural factors

Malaysia itself is a very religious state not to mention the other markets for KFCH company products, demographic changes is also a factor in this region whereby most people mostly prefer take-away rather than home cooked meals. Therefore for the company to succeed in its' endeavors it should produce products that are religious inclined or considerate to the socio/culture of the consumers, this would ensure their survival in market.

Environmental factors

Over the recent past there has been increased pressure in all the business organizations to act responsibly towards their surrounding community and environment. More in particular in the ASEAN region has been increased pressure on the food retailers to engage in eco-friendly practices. Through the company' Dynasty model, corporate social responsibility is listed as a major objective for the company in which it aims at providing sustainable consumption and production to reduce waste, consumption of resources and minimize any negative impact on the environment.

Technological factors

With a vision of providing consumers with high customer satisfaction technology can be best applied to attain this. The restaurant and fast food franchisers industry is increasingly integrating technological innovations into their business model and KFCH can offer high customer satisfaction because technology allows products to be readily to consumers and services can be more personalized (Acur & Bititc, 2004).

Dickinson (1999) indicates that technology will also benefit KFCH in terms of efficiency and reduced operational costs.

Porter's five forces

Threat of new entrants

The market in which KFCH Company operates is considered a market for big players who also include KFCH competitors like McDonalds, Carrols and Wendy's restaurant group. KFCH alone has numerous restaurants and stores located in different regions which in way hinders the entrants of new competitors more so the small traditional restaurants or stores into this market. The Threat of new entrants is mitigated as they would be required to have huge sums of capital that's hard to acquire, KFCH also offers specific barriers to new entrants that include economies of scale and differentiation (Porter, 1980).

Bargaining power of customers

Referring to Porter's writings the more the company products become undifferentiated or standardized, the lower the cost of switching and hence the more power consumers attain. With KFCH increasing attention towards meeting consumer demands, offering competitive prices for its products, customizing services and providing wide variety of food in its' menu the company has been able to maintain and control its consumer base (Porter, 1980).

Bargaining power of suppliers

This force according to Porter shows that supplier's power can be influenced by big players in the restaurant and fast food franchiser industry and they are in a bad position in terms of losing their business to them. This force offers to KFCH the advantageous spot in bargaining for fairer prices from its suppliers who are afraid of the company's potential to source their raw products from other suppliers at better prices.

Threat of substitutes

According to Porter the substitution of products can reduce its demand, as customers can easily switch to alternative products. In the restaurant and fast food franchiser industry this is practiced in the form of substitute for need and it's further weakened by new emerging trends, and as such is the reason why small traditional markets are emerging mostly in the Malaysia market. To counter this KFCH has acquired most of the existing small-scale restaurants (Porter, 1980).

Bargaining power of competitors

The high level of competition between KFCH and its' competitors, has made consumers to become more sophisticated and demanding, thus the reason why KFCH has focused more on acquiring consumer information so as to relate well with them. The competition has also forced industry players to offer more innovative services so as to build and maintain their market share.

Major opportunities

Non-food retail-KFCH has experienced a robust growth in the recent past that has seen it open up numerous restaurants and stores in different markets; it can use its network and low cost structure to diversify its investments more to the integrated poultry and ancillary where the competition is still minimal (Thomsen, 2004).

Further regional growth- KFCH currently operates in at least four countries and it has an opportunity to further enter into new markets in the ASEAN region to maintain a leadership position into the market.

Integrating the bakery with the with restaurants will not only see them save on space but it would also be able to run two business that are co-related hand in hand.

Major threats

Malaysia and the ASEAN region structural change have the potential of starting price wars among industry players. Competitors in the recreation industry are increasingly reducing prices as consumers are becoming keener on prices as they opt to go for lower prices.

Returns from overseas market could fall, which could be due to KFCH failure in its business model, economic conditions or competitor action.

McDonalds challenge due to its wide market and experience in the industry.

Regional growth is a costly affair and returns are always never certain.

Internal analysis-value chain

Primary activities

Inbound logistics

Inbound logistics- tasks here include storage of products, receipt of produce from suppliers and the internal transportation and handling of products. It is the first stage on the value chain and which has a potential of creating value. KFCH through its restaurants maintains a wide variety of menu for it consumers, while increasing the…

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