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Project Report on
Operation Management of KFC

Submitted To:

PROF. SIDDIQUE MALIK

(LECTURARE of PUGC)

Submitted By:

Haseeb Khalid (BB15119

Raheel Kamal (BB15118)

DATE: MAY 6, 2019

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 SIGNATURE: ----------------------

LETTER OF AUTHORIZATION
PROF. SIDDIQUE MALIK
PUNJAB UNIVERSITY GUJRANWALA CAMPUS
Dear Student:
I am pleased to assign you to undertake a research on the following topic
Topic:
I hope this report will contribute appreciably in developing you as quality
oriented objective researcher with a vision to play a significant role in
setting up new tradition of academic excellence.
It is to note that all information and data collected should be utilized for
academic purpose only.

MR. SIDDIQUE MALIK

Lecturer
Punjab University

Preface
This report focus on operation management of KFC, marketing strategies
and its marketing environment. We designed this report to provide a brief
description about its operation management, marketing mix and its major
competitors in Pakistan. We also discuss four P’s of marketing.

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 Acknowledgement

With profound sense of gratitude and regard, I express my sincere thanks

to my guide and mentor Dr. Siddique Malik for his valuable guidance and
the confidence he instilled in me, that helped me in the successful
completion of this project report. Without his help, this project would
have been a distant affair. His thorough understanding of the subject and
professional guidance was indeed of immense help to me.
Also, this acknowledgement would remain incomplete without thanking
the staff of KFC Gujranwala for their whole-hearted and kind co-
operation.

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TABLE OF CONTENTS

Contents Page
 Introduction:................................................................................................ 6

 Mission & Vision: ...................................................................................... 6

 History:……………………………………………………………6

 KFC in Pakistan:…………………………………………………7

 Values of KFC:……………………………………………………8

 Operations of OM department:………………………………….8

 Storage & Inventory Management:……………………………..9

 Quality Management Process:………………………………………………9

 Manufacturing Process of KFC:………………………………..10

 Current Target Market:…………………………………………11

 Customer Profile:………………………………………………..12

 Economic Analysis of Market:………………………………….13

 Marketing Strategy:…………………………………………….15

 4p's of marketing:………………………………………………..15
 Competitive Analysis:……………………………………………19
 SWOT Analysis:…………………………………………………20

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Introduction of company:
Introduction of CompanyKFC Corporation, based in Louisville, Kentucky, is the world’s most
popular chicken restaurant chain, specializing in Original Recipe ®, Extra Crispy TM, and Colonel’s
Crispy Strips® chicken with home style sides and five new freshly made sandwiches. Every day,
nearly eight million customers are served around the world. KFC’s menu everywhere includes
Original Recipe® chicken—made with the same great taste Colonel Harland Sanders created more
than a half-century ago. Customers around the globe also enjoy more than 300 other products—
from a Chunky Chicken Pot Pie in the United States to a salmon sandwich in Japan. KFC continues
reaching out to customers with home delivery in more than 300 restaurants in the United States
and several other countries. And in quite a few U.S. cities, KFC is teaming up with other
restaurants, Taco Bell and Pizza Hut, selling nearly fifty years ago; Colonel Sanders invented what
is now called “home meal replacement” – selling complete meals to harried, time-strapped
families. He called it, “Sunday Dinner, Seven Days a Week.” Today, the Colonel’s spirit and
heritage are reflected in KFC’s brand identity – the logo features Colonel Harland Sanders, one of
the best recognized icons in the world.
KFC specialized in chicken and they says,

“No body’s cooking like KFC today and we are the chicken experts” “There is no
competitor for spicy chicken which is made by KFC”

Mission
We are committed to customer satisfaction through offering high quality with excellent services
and good value. We take great pride in serving each other, our customer and our communities.
We seek continuous improvement in all that we do.

Vision
To sell food in a fast, friendly environment that appeals to pride conscious, health minded
customers.

KFC HISTORY:
KFC is an internationally renowned fast food industry in the world. They have the main
ambition to increase & maintain thequality in fast food industry. Their aim is to capture the fast
foodmarket. Basically they want to provide their products to anyone thatis why they expanding
their branches in all over the world. They want to increase their profit through giving maximum
satisfaction & other better facilities to people that they want. KFC is introducing a new item
“boneless fried chicken”, with even more attractive and charming taste

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KFC in Pakistan:
KFC is the world’s No.1 Chicken QSR and has industry
leading stature across many countries like UK, Australia,South Africa, China,USA, Malaysia and
many more. KFC is the largest brand of Yum Restaurants,
a companythat owns other leading brands like Pizza Hut, Taco Bell,A&W and Long John Silver. R
enowned worldwide for it’sfinger licking good food, KFC offers its signature products in
Pakistan
Too! KFC has introduced many offerings for its growing customer base in Pakistan while staying
rooted in the taste legacy of Colonel Harland Sander’s secret recipe. Its signature dishes include
the “crispy outside,
juicyinside” Hot and Crispy Chicken, flavorful and juicy OriginalRecipe chicken, the spicy, juicy &
crunchy Zinger Burger, Toasted Twister, Chicken Bucket and a host of beveragesand desserts.
KFC also has great tasting vegetarian
offeringsthat include the Veggie Burger, Veggie Snacker and VegRice meals. In Pakistan, KFC is g
rowing rapidly and todayhas presence in 10 cities with close to 60 restaurants. KFC

Values of KFC:
Focus all our resources to our restaurants operation because that is where we serve our
customers.

1) Reward and respect the contributions of each individual at KFC.

2) Expand and update training with time and be the best we can be and more.

3) Be open, honest and direct in our dealings with one another.

4) commit ourselves to the highest standard to the personalandprofessional integrity at all

times.

5) encourage new and innovative ideas because these are the key to our competitive growth.

6) Reward result and not simple efforts.

7) Dedicate ourselves to continuous growth in sales, profit and size of organization.

8) Work as a team
Pricing Policy for “Zinger Burger” new product from KFC
Manufacturing costRS.180/-
5% marketing cost (Per.Unit) RS. 50/-
Total costRS.230/-
15% G.S.T +15%
RETAIL MARGINRS.90/

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 Operations of OM Department (Supply Chain)
Supplies in Pakistan:
There are two classifications of supplies. The DRY FOOD SUPPLY and the FROZEN
FOOD SUPPLY. They have established their own warehouses for Dry Food Supply like Burgers-
Buns and Frozen Food Supply e.g. chicken, they have agreements with K & N and ‘fish’ is supplied
by Thailand and spices are supplied by Dubai to all over restaurants in Pakistan. KFC has a very
simple supply chain process. All the operations of kfc Pakistan are performed by the company i.e.
Cupola (largest restaurant management company in Pakistan). The supply chain process has 3
phases.
 Raw materials picked up from various suppliers and stored at two warehouses; the
normal storage and the cold-storage.
 Preparation of all products is done at branch except for the marinating of chicken and
sold to customers at the branch itself or delivered at the desired locations.
 Warehouses refill each branch according to their requirement (usually three times a
week) using company’s own vehicles and on the request of the branch manager.

Warehouse:
Pakistan is segregated into two areas, namely North and South. For simple understanding Multan
is set as midpoint. The area below Multan falls under the southern region whereas, Multan and
the area above it falls under North region. Each region hence has its own warehouse. The North
region has its warehouse in Lahore. The south region has its warehouse in Karachi.

Procurement:
To plan purchasing activities monthly budgets are made. These consist of dividing the allocated
budget into the inventory policies already defined at the warehouse from past data and
experience. FIFO (First in First out) method is used for all items for the inventory at the
warehouses as because are perishable in nature.

Packing Material:
This is purchased from local suppliers. Due to frequent changes in designing’s of boxes and deals
offered by KFC, the inventory of these is kept at a minimum.

Fish:
To cope with international demand fish is bought from Thailand. But in Pakistan, fish is bought
from local dealers as it is a low selling item.

French Fries:

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The French fries used in KFC are imported directly from America. They are also imported to
Pakistan by Yum Company through china where they also come from America.

Storage and inventory management

Chicken:
Chicken inventory is for 15 days. Chicken is not stored in the warehouse, in fact there is a
separate cold storage area is built for chicken right beside every warehouse in each region.

Sauces:
Inventory for Sauces are stored for around 25 to 30 days depending on the expiry dates and
forecasted sales.

Spices and Herbs:

Inventory for spices and herbs are stored according to forecasted sales and the lead time given
by the procurement department is three months.

Bread and Buns:

After every 4 days bread and buns are supplied directly to the KFC branches from the factory.
Every single inventory item at the warehouse is audited on weekly basis to match it with the
numbers in the system..

Quality Management Process:

Food Safety and Quality:
KFC took their products well above the minimum temperature recommended by World Health
Organization (WHO).

Supplier Quality:
Regular submissions of quality reports are monitored to ensure suppliers performance.
Restaurant Quality: The main characteristics for KFC restaurant excellence are CHAMPS. C for
cleanliness for hospitality, A for accuracy, M for maintenance, P for product quality and S for
speed of service.

Halal Food Fundamentals in KFC:

Halal Food which is absolutely necessary and in accordance with the Islamic Shariah Law. All the
food that is consumed is considered halal if it meets the certain characteristic and requirements
such as (1) Hygienic (2) Clean (3) Not Dangerous and Harmful for Health and Body (4) Free from
the prohibited parts of animal body parts and other stated in Shariah (5) Free from anything

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which are considered as filth (najis) under Islamic Law. These are the main features of Halal Food.
All the chickens and chick raw materials sent by certified poultry must meet the standards of
Islamic Law.

Roles and responsibilities of OM Department:

As we are focusing only on OM department so we will only mention the roles and responsibilities
of OM department. It is being mentioned in hierarchy HOD supply chain give necessary
instruction to manager supply chain and then managers pass on the instructions to Supply Chain
Executives. All tasks are done with the coordination of supply chain executives and Managers
Supply Chain. The supply chain executive communicates with managers about the requirement
of materials and supplies on monthly and weekly basic. Managers supply chain make plans and
forecast about ordering supplies and then final decisions are further communicated to
purchasing department. But there are some flaws in supply chain because many times in some
franchises customers claim that one of their favorite meal stock out in the peak time. I personally
face the same situation in seasonal occasions.

KFC MANAFACTURING PROCESS:

6 cups Crisco Shortening1 eggs well beaten2 cups Milk2 cups Flour2 teaspoons ground pepper3
tablespoons salt1 teaspoon MSG1/8 teaspoon Garlic Powder1 dash paprika2 Frying Chickens
cut into 6 pieces Place shortening into the pressure cooker and heat over medium heat to the
shortening reaches 400F. In a small bowl, combine the egg and milk. In a separate bowl,
combine the remaining six dry ingredients. Dip each piece of chicken into the milk until fully
moistened. Roll the moistened chicken in the flour mixture until well coated. In groups of
four or five, drop the covered chicken pieces into the shortening and lock the lid. When
pressure buildup cook for 10 minutes.

Philosophy of kFC the CHAMPS program:

Champs stands for our belief that the most important thing each of us can do is to focus on the
customer. It stands for our commitment to provide the best food and best experience for the
best value. CHAMPS stand for the six universal areas of customerexpectationcommon to all
cultures and all restaurants concepts
THESE CHAMPS are:
 Cleanliness
 Hospitality
 Accuracy
 Maintenance of facility
 Product quality
 Speed of service

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Goals of KF
Current target market:
Promotions
In Pakistan KFC not advertise their products too much because people KFC
due to its reputation in other countries. They promote their products through
special packages. They promote their products through billboard, pamphlets
and through other promotion strategies.

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.
 Demographic
 Behavior
 Geographic
By using these three bases they segmented the market as under.
Demographical Basis
In demographics their first segment is consisted of the income factor i.e. high income, average
income and low income.
Behavior
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 & quality
Geographical Basis
On the basis of the geographical factor we have divided our market in two main segments.
 Urban areas
 Suburban areas

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Customer Profile criteria:
1.Gender: KFC is for each gender both male and female.
2.Income: Everyone can use the KFC service upper and middle class .
3.Age: age limitation for using this product above 15
4.Occupation: By profession also everyone can use this product means businessman student
workers and other peoples.
5. Education: It has no need more education that why the person who know something can
easily enjoy with this product.
6. Family life cycle: KFC is suitable in every stage of life like single married couple and also those
who have children can use this product.
7. Lifestyle: This product is used in every level of social class like upper, middle class.
8. Attitude : When the customers once buy this product after that they can use the product
continuously.
9. Purchasing decision: Often KFC changes the purchasing decision of customers because of its
good attributes.
10. Geographic region: Geographically KFC is used in every part of the country as well as all over
the world.

Product positioning: Customer perceive this product as a unique product that other are not
giving .
Attitudes: The attitudes of the public is very good people like our this new product like others.
Purchasing process: Many people come from home to eat this , and some make impulse
decision as they saw it .

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 Economic analysis of market:
A market in this context refers to a number of all actual and potential buyers of a product (Kotler
et al 2003). These buyers have a need to satisfy their needs through exchange . These needs make
up the demand for particular products and services. Several components must be considered, as
all these components have a direct or indirect impact on KFC’s success. Changes in the below
described components over the last couple of years have led to big changes in people’s attitudes
towards healthy food. It explains why Australians today want to eat healthy and nutritious-rich
food in order to keep themselves healthy and that KFC must adjust their range of product and
their company image to appeal to these new expectations, people have.

Macro environment
KFC operates in a larger macro environment of forces that creates opportunities, but also threats.
(Kotler et al 2003). A company such as KFC usually cannot influence trends in the macro
environment, as they affect people and organizations on a larger scale. However,.com KFC has to
carefully examine macro environmental trends and must create competitive responses to such
trends. There are six major macro environmental forces KFC has to take into account.

Micro environment
The microenvironment consists of all forces that are close to KFC, and on which KFC has an
impact. They directly affect KFC’s ability to serve its customers. (Kotler et al 2003). Three major
components influence KFC’s micro environment:

Competitors
Because the fast food market in India is highly competitive, KFC faces a wide number of direct
and indirect competitors. KFC’s main competitors are fast food chains such as McDonald’s and

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Domino’s, which are already well established throughout Pakistan .McDonalds’s in particular is a
direct competitor, as they have already successfully introduced their Salads plus line , which
directly targets ‘healthy food’ conscious Pakistanis. But, there are a number of other competitors
that is also focusing on ‘chicken’ types products. All this competition makes it quite difficult for
KFC to maintain or even broaden their customer base. However, with the introduction of a new
and healthy product range, KFC can differentiate itself from most competitors and will gain a
competitive advantage.

Customers
KFC’s customer market consists solely of the consumer market (Kotler et al 2003). KFC’s products
are bought by individuals (males, females, singles, and families). Therefore, the product range
KFC offer should appeal to as many people within this consumer market as possible, to ensure
that the maximum amount of products can be sold. The characteristics of these individuals and
a segmentation of them are discussed later in this report.

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 Marketing strategy:
There are different strategies adopted by KFC for different events. They market their products
on different events and in different activities as they are helping SOS village.
According to KFC, kids become the future permanents customers and we know very
well that without any marketing strategy no marketing program and no product is successful
because we depend upon customers, customer not depend on us. KFC is following Niche
Marketing and Societal Marketing techniques. KFC possess a western culture because some of
the Pakistanis people are also following that culture.

 KFC are moving from Divisional Level to the District level by opening branches

 KFC also offer free home delivery.

 KFC open their outlets on reachable places.

 KFC menu consists of more than 30 products.

 KFC gives more priority to Family.

There are 4 P’s of Marketing:

1. Product
2. Pricing
3. Promotion
4. Placement

1st. Product
· Original recipe® chicken
· Extra Tasty CrispyTM chicken
· Hot WingsTM pieces

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 · 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

Brand:
There are three brands of the KFC:
1) Taco bell
2) Pizza Hut
3) Long john silvers

2nd. Pricing:
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

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 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 = 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

3rd . Promotion:
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.

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4th .Placement:
In the case of the KFC the placement of the product is not important but the placement of the
restaurant is important. The products of the KFC is cooked at the sport and then served after
that. KFC Cavalry branch opened in June 1998, in the main commercial zone of Cavalry Grounds
near the Jinnah Flyover. The restaurant is a three-story building including the basement (where
the chicky play area is located). It is ideally located in the center of a main commercial and
residential area of Lahore. The area that KFC Cavalry caters for is the residential and office area
of Cavalry Grounds and Cantt, as the main target market. Another branch the KFC opened in the
Lahore is in Garden Town (opposite to Barkat Market). KFC also target the Faisalabad and open
its branch in D ground.
Now we can easily judge that the KFC target the place for their restaurant, which is well known
and is in the Porsche area where the income level of the people is high then the middle class
level. Because the prices of the KFC products is high with comparison to the local products
manufacturer who are dealing in the same kind of product in which KFC is dealing but the prices
of the KFC is high due to special taste, high quality, and due to international brand, it is the world
recognized fast food restaurant all around the world. So, for the placing strategy, KFC chose the
well income class area for their restaurants.

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 Competitive analysis
Competitors
You cannot enjoy the business without competitors. No organization can afford to ignore their
competitors. It is very important for a marketing managers to monitor the activities of their competitors,
what they are doing? KFC adopted such sort of strategy that there is no competitor for spicy chicken,
which is made by KFC. KFC beats its competitors through the revising marketing strategy at every
movement but the main competitor of KFC are Mc Donald’s

Competitive Advantage

KFC Mc Donald’s

Spicy Product

Pakistani People like spicy food rather than French Fries and Burgers
boiled food

Arabian Rice and Zinger Burger Big Mac

Free Delivery Chargers on Home Delivery

Chicken is eaten in very community Beef is banned is some community

Local stuff and highly qualified because Its stuff is consists of simple graduates and
local stuff can better deal with customers give them training

KFC uses Top to Bottom and Bottom to Mc Donald’s use Top to Bottom approach in
Top approach in their Management their Management

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 SWOT Analysis
Strengths
 Goodwill and reputation: The company certainly has earned a good name and reputation
by its previous products and services in the market. It is even more recognized in other
markets outside Pakistan, where the company is among the leading fast food giants. The
brand is recognized and trusted in Pakistan for its quality products, price, and customer
service. It therefore has a good head start and enjoys a good chance of becoming a leader
in Pakistan fast food industry.

 Employee Loyalty: Employee Loyalty is one of the major strengths of KFC. The turnover
rate in the company is amongst the lowest in the industry.

 Customer Loyalty: Despite gain by Boston Market and Chick-fill A, KFC customer base
remained loyal to the KFC brand because of its unique taste. KFC has continued to
dominate the dinner and take out segment of the Industry.

 Ranks highest among all chicken restaurant chains for its convenience and menu
variety. It generates $1B revenue each year.

Weaknesses
 KFC was losing market share as other Chicken chain increased sales at a faster rate.

 KFC share of Chicken Segment sales fell from 71 percent 1999 , to less than 56 percent
in 2009 , a 10 -years drop of 15 percent.

 Huge competition in this segment.

 KFC has not yet invested much on R&D, and innovating new products for Pakistan
Markets. This may lead to failure of their products as they are not in line with the Pakistan
mind set, peoples taste and preferences and their likes and dislikes. This may prove fatal
for the company.

Opportunities
 New Markets: Globalization has opened doors for new markets for the company. As the
developed markets are mostly saturated, the developing countries like Pakistan and China

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 promises a good market and generation of demand in the future. With more than 70% of
the markets in Pakistan being unexplored and un organized, KFC has a good scope of
expanding its operations in the country.

 Cross Culture: Generally there is a good acceptance of American culture of fast food in
Pakistan. People are opening up to fast foods more regularly in their daily lives and not
just keeping it a once in a month affair. Thus Pakistan mindset is fast changing.

 Large Youth population: Pakistan has a very large share of youth population a compared
to other countries. More than 60% of the population is under the age of 30yrs. As the
young generation are more open to fast foods and demand it more, this is a good news
for the company.

 New variety: Company can also come up with new variety in the menu like Pizzas, garlic
breads to attract more customers.

Threats
 Competition: Competitor companies like McDonalds are fast catching up with the market.
McDonald’s with sales of more than 19 billion in 1999, accounted for 15 percent of the
sales of the nation’s top 100 restaurant chains.

 Organizations like PETA People for Ethnic Treatment for Animals have given a bad name
to the company which may prove disastrous to the image of the firm. Currently, KFC is
under massive attacks from animal organizations, questioning the way KFC’s suppliers are
threatening the chicken, before they got slaughtered. Anti-KFC campaigns, such as the
one from PETA are affecting KFC’s brand image in a negative way and result in direct dollar
losses, as less people are consuming KFC chicken.

 Saturated US Market: Now KFC cannot rely on just its home market to generate sales. As
the US markets are already saturated and leave no or little scope for growth, company
necessarily needs to look at offshore foreign markets to generate sales and keep up the
profits.

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