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Business Strategy of Fast Food Giants in Pakistan​

Table of Contents
1. Introduction ​3
2. Key strategies adopted by the organizations along with their
sustainability ​3
3. Ways in which major brands have taken market share and
developed a strong position ​7
4. The Main Opportunities and Threats in the Sector ​9
5. Importance of Innovation and Creativity for the New Entrants
in Fast Food Market ​11
6. Conclusion ​12
References ​13
1. Introduction
The discussion in this report is based on different aspects related to the strategies and operations
of large fast food organizations that are operating around the globe. The application of different
strategic theories and models such as PESTEL analysis, Porter Five Forces along with evaluation
of the ways in which these organizations have been able to obtain majority of the market share
through the use of different techniques that are important in in-depth analysis of the ways in
which these organizations have been able to enhance their customer reach and market share.
Besides, the discussion about the opportunities and threats that are being faced by these
organizations along with the innovations that are part of their entry strategy are also part of the
discussion in this assessment.
2. Key strategies adopted by the organizations along with their sustainability
In the view of Wheelen and Hunger (2011), the process of strategic management is important for
an organization to achieve its goals and objectives in the long run with respect to expanding its
operations in different parts of the world along with an increase in the overall market share.
One of the key strategies that have been adopted by the large food giants in Pakistan for
expanding the scope of their operations is the strategy of franchising. In the view of Hussain, and
Windsperger (2010) franchising refers to the business arrangement where the franchisor provides
franchisee the authority to use its trademark along with its systems and processes for the
production of goods and services and to serve customers. For example, fast food giants such as
McDonalds and KFC have been expanding their business at a rapid pace through the adoption of
the technique of franchising. By means of franchising, the two organizations have been able to
enhance their capacity towards reaching out large groups of customers in different parts of
Pakistan (Kamal, Ashraf and Ali, 2014; Safi, Ullah, Ali and Shah, 2011).
However, there are certain factors as well that can have a significant impact on the operational
performance and capacity of these organizations. The analysis of these factors through the
application of various strategic management tools and techniques has been provided below
PESTLE Analysis
According to Gupta (2013) PESTLE analysis in strategic management refers to the evaluation of
the impact of political, economic, social, technological, legal and environmental factors on the
performance and profitability of an organization. The ways in which these elements have an
impact on the performance of the firms in the fast food industry of Pakistan are illustrated below:
Political
The government of Pakistan has an important part to play in the growth and development of the
fast food sector in the country. One of the ways in which government plays its part in shaping the
activities of the food sector in Pakistan is the rate of taxes imposed on the organizations in this
industry. Besides, the incentives provided by the government also contribute towards the long-
term development of this industry (Dawn, 2016).
Economical
One of the most important economic factors that have an impact on the fast food industry of
Pakistan is the contribution that they have made towards bringing about innovations within its
operations. On the other hand, the fluctuations in the level of the economic situation of the
country are also having a significant impact on the purchasing power of the individuals in
Pakistan. As a result of that, fast food companies in the country are also affected significantly by
means of purchasing power of the individuals.
Social
Social factors also have a considerable significant impact on operations of the fast fashion
industry in Pakistan. Although customers regularly visit different chains of fast food stores; this
trend is resulting in the increase in the overall level of obesity in the country. Therefore, the
increase in the level and awareness within the Pakistani society regarding obesity could have a
considerable impact on the sustainability of the operations that are carried out by fast food
organizations in Pakistan (Mashhadi and Ijaz-Ur-Rehman, 2012).
Technological
With the constant advancements in technology having a considering impact on the performance
of organizations in different industries; therefore, these advancements also have a significant
impact on the fast food industry of Pakistan in the recent times. The findings in this respect
illustrate that increase in development of technology has enabled the organizations to serve food
in convenient place and at convenient price (Mashhadi and Ijaz-Ur-Rehman, 2012).
Legal
The government of Pakistan in collaboration with Pakistan Standards and Quality Control
Authority has developed standards that are needed to be followed by the firms operating in the
food industry of the country (PSQCA, 2017).
Environmental
Increasing awareness amongst the members of the society regarding the environmental factors
plays an important role increasing the pressure on the organizations to abide by the
environmental rules and regulations. For this purpose, fast food giants such as McDonalds and
KFC are constantly involved in reporting environmental measures that they have undertaken
within their corporate reports (Kamal, Ashraf and Ali, 2014).
Porter Five Forces
According to Dobbs (2014), Porter five forces refers to the application of five different aspects
that illustrate the extent of the competition that exists within a particular industry. Different
elements that are part of Porter Five forces analysis are threat of new entrants, bargaining power
of buyers, bargaining power of suppliers along with threat of substitutes and intensity of
competitive rivalry. The application of Porter Five Forces on the fast food industry of Pakistan
has been presented below:
Threat of New Entrants
On the basis of the analysis of the fast food industry, it can be stated that the threat new entrants
in the industry are low due to the fact that firms are required to make considerable investment to
enter into the food industry. Therefore, the barriers in the industry do not facilitate new firms in
making towards the fast food industry.
Bargaining Power of Buyers
The bargaining power of buyers in the fast food industry is high mainly due to the low switching
cost and increasing number of options that are available with the customers.
Bargaining power of suppliers
The power of suppliers is on the lower side due to the availability of large numbers of suppliers
in the industry. Therefore, the situation is favorable for the fast food organizations in this case.
Threat of Substitutes
The threat of substitutes with respect to the offerings of fast food companies is high due to the
availability of large numbers of substitutes along with low cost of switching incurred by the
buyer while switching from the brand of one organization to another.
Intensity of Competitive Rivalry
The nature of rivalry is currently very high as there is an intense level of competition between
organizations such as McDonald's, KFC and Burger King in the fast food sector of Pakistan
Porter’s competitive positioning
The competitive positioning of the organizations in the fast food industry is generally based on
differentiating themselves from their competitors. Examples of some of the organizations in this
sector such as McDonalds and KFC can be provided who are constantly involved in
differentiating their offerings to deal with the competition and changing needs and demands of
the customers.
Miscellaneous Factors
Apart from the factors that have been highlighted above, the factor which can be considered as
important for fast food giants operating in Pakistan is increase in the trend of casual dining. The
increase in the demand of the consumers is also one of the key factors behind the development of
number of restaurants across the country (Times of Pakistan, 2014).
However, the rising trend of obesity in Pakistan could well result in decline in the sales of the
products of McDonald's. One of the statistics with respect to obese indicates that Pakistan is
th
currently at 9 number in the world in terms of having obese individuals in the society (Tribune,
2014). Since consumption of fast foods is considered as one of the major causes of weight gain;
therefore, the situation is unfavorable for the sustainability of fast food companies in the country.
3. Ways in which major brands have taken market share and developed a strong position
The two major brands that have been discussed in this section are KFC and McDonalds. Both
these organizations have effectively adopted internationalization strategies to expand the scope
of their operations in the fast food industry of Pakistan. According to Sui and Baum (2014)
internationalization strategy refers to the kind of business strategy through which firms are
involved in expanding the scope of their operations in multiple countries.
KFC and McDonalds have adopted multi-domestic globalization strategies while expanding their
operations not only in Pakistan but in other parts of the world as well. In the view of Bondy and
Starkey (2014) multi-domestic internationalization strategies refer to the kind of strategies where
organizations customize their offerings based on the needs and requirements of the local markets.
Therefore, KFC and McDonalds while operating in Pakistan have been involved in keeping into
consideration the needs and preferences of the local culture while serving its customers. One of
the examples in this case is the arrangement that these fast food companies have to make to serve
Halal food items to its customers in Pakistan something which they are not required to do in
other countries (Ayyub, Rana, Bagi and Al-Thomaly, 2013)
Drivers of Yip
One of the key drivers of Yip that can be linked to the process of globalization of McDonalds
and KFC in Pakistan is the driver related to market. The fast food market of Pakistan has good
potential for these two fast-food giants. One of the findings in this case illustrated that the fast
food industry of Pakistan is going through a boom despite the severe competition (Brand
Synario, 2014).
Market Entry Strategies
The key market entry strategies that have been adopted by these organizations are franchising.
Due to the adoption of this strategy, McDonalds and KFC have been able to open their outlets in
different locations across Pakistan and reach out towards greater numbers of customers.
CAGE Framework
In the view of Hejazi and Ma (2011) CAGE framework illustrates different aspects that are
important for organizations while expanding their operations in different countries such as
cultural, administrative, geographical and economical.
Application of this framework on the activities of KFC and McDonalds in Pakistan illustrates
that both these firms are involved in shaping their operations towards the cultural norms and
values of the local society which is one of the key sources of their significant popularity in the
country. On the other hand, the administrative issues faced by the organization include dealing
with the local authorities along with abiding by the local rules and regulations Kashif, Kashif,
Mingione, Mingione, Noori and Noori (2017). As far as the economic aspect of CAGE
framework is concerned, the analysis of the operations of these organizations illustrates that the
economic size of Pakistan coupled with the size of the fast food industry in the country has
enabled both these organizations to target large numbers of customers in the long run. In terms of
geographical issues, as both McDonalds and KFC have their headquarters in the U.S.; therefore,
the geographical distance that they have to cover is significant. One of the ways in which they
have reduced the intensity of the geographical distance is by means of localizing their policies in
accordance with the demand of the local environment.
Advertising and Promotional Campaigns
The advertisement and promotional campaigns of these organizations are directed towards
targeting multiple groups of customers and initiating different kinds of offers for them.
Supply Chain Efficiency
According to Cao and Zhang (2011) supply chain efficiency is extremely important in the food
sector as it is important to deliver food items in time to avoid them getting perished. The supply
chain efficiency of both KFC and McDonalds are based on responding efficiently and promptly
towards the needs and demands of the customers. The supply chain efficiency of these
organizations includes delivery of the products inside the organization along with making
deliveries to the customers (KFC Information System, 2017;
Product Range
Some of the examples of the variety that KFC in Pakistan offers to its customers are combos,
burgers, midnight deals, chicky meals along with snacks and beverages (KFC Pakistan, 2017).
On the other hand, McDonald's also has a large variety to offer its customers in Pakistan which
includes offering different kinds of products such as burgers and snacks to individuals belonging
to different age groups. Besides, McDonald's to attract families has also arranged playing
facilities at its different outlets in Pakistan (McDonald's, 2017).
The combination of all these factors has been instrumental for both KFC and McDonalds in
consistently expanding the scope of their operations along with their market share in Pakistan on
a consistent basis.
4. The Main Opportunities and Threats in the Sector
There are numerous opportunities present in the Fast Food and Casual Dining sector particularly
in the case of large restaurants operating in the country as discussed below:
• The fast-food industry is growing at a steady rate over the last few year and is expected to
generate similar growth in the years to come highlighting an immense potential for firms
operating in the industry. An estimate byAhmed (2016) indicates that the fast food market
in Pakistan can anticipate a growth of 21% annually given the change in the appetite of
the people over the years. The acceptability of fast food and trend of casual dining has
increased recently.
• Due to increasing appetite of people, the competition in the industry has become intense;
however, large players in the industry have an opportunity to overcome this intense
competition as they already have outlets in multiple cities accompanied by economies of
scale.
• There is an opportunity present for the fast food industry including the industry giants to
alter their product offerings in a manner so that the concerns of target market regarding
unhealthy fast food can be negated. It can be done by getting involved in products, which
utilize lower amounts of oil or even transformational innovation can work in the given
case (Ahmed, 2016).A survey by Kashif, Mingione and Noori(2017) indicates that
approximately 50% of the fast food consumers believe that it is unhealthy and they are
looking for a suitable alternative to replace their casual dining behavior.
In addition to these opportunities, the industry also has various threats as illustrated below:
• In the view of Sajwani et al. (2009), the main threat faced by the fast food and casual
dining industry is the increasing health concerns of the target audience as the industry is
experiencing that it may slow down the growth in the industry. This threat is not limited
to the context of Pakistan but is applicable around the globe as people are increasingly
becoming aware of this trend.
• There is an intense competition within the fast food and casual dining industry; both within
the industry and as experienced by competition from the substitute products. It has led to
significant marketing and alter in the strategy of selling goods in the fast food market.
The excessive marketing budget of the fast food giants in Pakistan has been observed in
last few years, which can be attributed to the factor of competition (Zilberman, Lu and
Reardon, 2017).
The above opportunities and threats discussed clearly highlight that there are immense
opportunities available in the Pakistani fast food and casual dining market but the firms need to
face few threats as well. In addition, it can be discussed that the casual dining market is here to
stay in the long-run given the appetite of the people but it is possible that the big firms in the
industry may need to change their menus. The new entrants in the industry include both the
multinational brands such as Fat Burger and local start-ups as well (Mahawrah, Shehabat and
Abu-Shanab, 2016).
5. Importance of Innovation and Creativity for the New Entrants in Fast Food Market
As defined by Bigliardi and Galati (2016), the innovation and creativity are highly important in
today's business environment particularly when the competition is high in the industry as evident
from the case of fast food industry in Pakistan. The innovation in the fast food industry has been
employed in terms of both alteration in the products and the technology employed to serve the
customers in a better way. An example of new product offering is the introduction of Pizza Fries
in Pakistan recently. Besides, there are many fast food chains such as McDonald's, which have
introduced its application for the mobile phones so that the orders can be placed smoothly. In the
same manner, the fast food chains have worked to improve their delivery system as well. For
example: when the cell phone service is off in Sindh due to security threats in the recent times,
the fast food companies still take orders online and timely deliver it.
In addition, the innovation has been employed by new entrants in the market as well as they look
to grab the market share in the long-run. The new entrants have utilized innovation in their
products as well as marketing tactics in order to attract the consumers towards their restaurant.
The importance of innovation for these new entrants is very high given the intense competition
in the industry and a high threat of substitute products (Kashif, Mingione andNoori, 2017). A
research conducted by Mahawrah, Shehabat and Abu-Shanab(2016) supports the findings as
after thorough research, it was found that the innovation is the key behind success in any
industry particularly for the start-up business. It is further reiterated that the creativity and
continuous innovation can help the businesses shine in the long-run. The survival of businesses
in ever emerging industries like Fast Food industry is not possible without continuous innovation
and creativity given the ever-changing needs of the target market. The discussion helps
summarise that the innovation and creativity are highly important in the fast food sector of
Pakistan given the intensity of competition in the industry.

6. Conclusion
On the basis of the analysis that has been undertaken in this assessment, it can be concluded that
McDonalds and KFC throughout Pakistan have been involved in effectively performing their
operations on the basis of the efficiency of their strategies with respect to familiarizing with the
local customs and norms of the country. Besides, the increase in the demand of customers in
Pakistan regarding the consumption of fast foods provides further opportunities to these
organizations to expand their operations in the future. However, there are some challenges as
well that are needed to be taken into consideration by fast food organizations in Pakistan. One of
the challenges is concerned with increasing health concerns due to excessive consumption of fast
food; whereas, the other issue is related to law and order and security challenges. ​

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