Porter’s 5 forces analysis of KFC
The Porter’s five forces analysis is a business evaluation model that was developed by Michael Porter in 1979. This model is used to assess a firm’s competitiveness in an industry while taking into consideration five important factors namely:
- Threat of new entrants
- Threat of substitute products or services
- Bargaining power of suppliers
- Bargaining power of buyers
- Intensity of competitive rivalry
The analysis of KFC using Porter’s five forces
Popularly referred to as KFC, the Kentucky Fried Chicken has been in existence since 1930 and is a fast food restaurant popular for its chicken. The restaurant has thrived and even expanded to other markets outside the US, in continents such as Asia, Africa and Europe. The following analysis is aimed at determining the competition situation for KFC and how the company can improve its services and products in order to thrive in a highly competitive market.
- Threat of new entrants. Although the fast food chain market is difficult to penetrate due to many competitors, KFC’s services and products are receiving stiff competition from Radix Fried Chicken which is a new restaurant that was launched in 2008. Radix Fried Chicken has become popular because of it offers a fresh menu and this has appealed to many clients. However, KFC has the advantage of being a well established household name and this has made it very popular in its abroad ventures. It is easier for clients to choose KFC as compared to other new fast food restaurants unless the new entrants actually offer different menus as compared to the more established restaurants.
- Threat of substitute products. There are many other fast food restaurants that offer similar products as KFC and this are giving the fast food chain a run for their money. For instance Popeye’s Louisiana Kitchen has been one of the greatest market rivals for KFC. The fast food restaurant offers side dishes such as Cajun gravy, mashed potatoes and rice in addition to providing consumers with mild and spicy chicken options. This has made the fast food restaurant very popular. On the other hand, KFC has upped its game by providing Wi-Fi services and also introducing morning services.
- Bargaining power of suppliers.KFC has access to many suppliers of their main product which is chicken. This gives the restaurant flexibility to work with the best suppliers. For instance in 2004 the company terminated a contract with one of their chicken suppliers because of crude slaughtering of the chicken.
- Bargaining power of buyers. The buyers of KFC products have access to many similar products in outlets such as McDonald’s, Subway and Pizza Hurt. This makes it difficult for KFC to raise prices because there is stiff competition from the other competitors.
- Intensity of competitive rivalry. The fast food market is highly competitive. There is definitely intense competition that KFC constantly faces from other fast food chains especially McDonald’s. This has caused KFC to develop mechanisms that ensure it competes effectively. One of the most popular methods KFC has used to retain clients is by introducing a smart card for kids that offers them discounts in KFC and other favorite outlets such as Sunway Lagoon, MPH Bookstore and Zoo Melaka.
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References
http://www.ukessays.com/essays/business/introduction-to-kfc-and-the-study-of-its-business-environment-business-essay.php
http://www.slideshare.net/ilyanaismarau90/task-5-5-porter-model-kfc