Case Study on Operational Strategies and Management of KFC: An Enquiry

Subject: Operation Management

Course ID: MBA512

Sec: 1

Group Name: G

Submitted to:

Prof. Dr. Md. Mamun Habib

Professor Department of General Management

School of Business and Entrepreneurship

Independent University, Bangladesh

Submitted by

Name ID

Adithya Bhowmik 2031295

 Letter of Transmittal

September 20, 2020

Prof. Dr. Md. Mamun Habib

Professor

Department of General Management, School of Business and Entrepreneurship

Independent University, Bangladesh

Subject: Submission of case study on “Operational Strategies and Management of KFC: An

Enquiry”.

Dear Sir,

We would like to inform you that, it is a great pleasure for us to submit the case study on
“Operational Strategies and Management of KFC: An Enquiry”. as a requirement for the
completion of MBA program. Throughout the case study we have tried with the best of our
capacity to accommodate as much information and relevant issues as possible and tried to follow
the instructions as you have suggested. we have tried our best to make this case study as much
informative as possible.

We would like to request you to accept our case study for further assessment and consider the
limitations of the study.

Sincerely

Group G
 Executive Summary

Kentucky Fried chicken (KFC) is one of the world largest fast food chain restaurant. In this case
report we analysis about operation management and strategy of KFC. Operations management
involves planning, organizing, and supervising processes, and make necessary improvements
for higher profitability. The adjustments in the everyday operations have to support the
company’s strategic goals, so they are preceded by deep analysis and measurement of the current
processes. KFC has maintained three operation management decision areas as design of goods
and services, quality management and supply chain management. They reduce supplier risk,
update the menu item and reduces materials handling costs. KFC is famous for fried chicken.
Their main goal is quick service and delivery to its consumers. They always build outlets suitable
location So that It will increase their sales. They also focus on quality, costs of materials and
labor, and added-value to the finished product. They provide Nutrition Facts & Calorie
Information of their products. Every KFC restaurant are audited three times a year by our team
and recognition their good employee. It will help grow productivity.
 Introduction

The role of operational management has become more diverse and challenging due to the present
global business context, and rapid product development for customer requirements. Without the
effective performance of operations and process management, no company can be sustained and
succeed in the long term. In today's world, with the increase in completion and advancement in
technology, the rate of corruption is also increasing. So the management should manage the
operations in such a way that will support the firm to survive in the competitive environment
throughout the world without involving any corruption. In other words, operations management
should be turned into strategic operations management. The world is becoming so advanced that
it demands continuous innovation to sustain in the competitive era including the markets and
industries.
Kentucky Fried Chicken a.k.a. KFC, is one of the leading fast food giants in the world. It is
based in Louisville. It has been ranked third largest chain with more than 13000 outlets in more
than 109 countries and serves approximately 12 million consumers every day. KFC is known for
its original recipe for fried chicken, which is prepared using a blend of secret 11 herbs and spices
(Buick, 1982). They are operating in an industry which is based on quick service and delivery to
its consumers. They have managed to curtail the service time by more than 50% and improved
the productivity of its employees. This helped them to outperform others and yield higher profits
and sales figures (Fitzsimmons, Fitzsimmons and Bordoloi, 2014). They aim at providing
continued superior service whilst non-stop improvement. It is highly crucial for them to improve
the efficiently of their entire operation so as to be able to serve customers as quickly as possible.
To achieve this, they have focused on all aspects, such as facility layout, quality management,
total costs and infrastructure to match up with the desires and need of its consumers.
KFC is a global company with a diverse and ever-changing workforce, faces significant
challenges in operating their businesses internationally but they face those challenges
strategically, adapt with policies to these markets. KFC Built a diverse foundation to operate as a
local business in international markets. Criticism work as a motive toward success. Though
criticism rose about KFC but it could not hinder its success because of their policy and strategy.
A proverb goes on “prosperity’s right hand is industry”, by expanding its operations globally
KFC facilitated its success and become famous to worldwide, which proves that “Fame is the
perfume of heroic deeds”. [ CITATION Jac20 \l 1033 ]
 Case Study

Operations management is the administration of business practices to create the highest level of
efficiency possible within an organization. It is concerned with converting materials and labor
into goods and services as efficiently as possible to maximize the profit of an organization.
Operations management teams attempt to balance costs with revenue to achieve the highest net
operating profit possible.

KFC uses various tools and techniques to determine the best selection of its location, such as
factor rating method, cost-profit-volume analysis, and transportation and simulation models
(Matai, Singh and Mittal, 2013). KFC considers lot of factors in designing their facility. They
ensure their proximity to the consumers, so that they can be easily approached. This is why they
have opened so many locations in each city. They understand it is important to remind the
consumers about their presence. They always select a favorable location for its outlets, which
will lead to increased sales. They make sure that all the outlets are located on the main road, so
that footfall rises. Since they are operating in a saturated and a highly competitive market, they
need to keep the prices low. For this, they choose locations that are available at low costs. All
these decisions will help them to keep the price of their product low. They locate their outlets
where proper infrastructure is available and where there is abundance of skilled labor
(Ramachandran and Prasad, 2014). This can reduce labor cost as they are easily available and
easy access to stores for consumers is possible. Most of the stores of KFC are franchised, which
reduces their maintenance efforts (Wang, 2014). They simply conduct regular quality checks to
ensure that all the required standards are met. Their facility layout decisions are influence by the
volume of production, fragility of the product, nature of the service to be provided and the costs
required to build the operations area. Their outlets are brightly lit, with attractive color schemes
and comfortable seating arrangement and a warm and welcoming staff. Their suitable and quick
cooking process, 3 superior service makes it desirable among consumers. This effective layout
helps them in easy supervision, smooth coordination which leads to high flexibility and
efficiency. This also reduces bottlenecks and reduces materials handling costs.

All manufacturers set out to perform the same basic function: to transform resources into
finished goods. To perform this function in today ‘s business environment, manufacturers must
continually strive to improve operational efficiency. They must fine-tune their production
processes to focus on quality, to hold down the costs of materials and labor, and to eliminate all
costs that add no value to the finished product. Making the decisions involved in the effort to
attain these goals is the job of the operations manager.

Basically, KFC is the chain of the restaurant which offers goods and services to the consumers.
The Goods offer by KFC is a huge variety of chicken-based products and fast food items. The
service includes the quick and friendlier service to its clients in a restaurants industry. The base
of service design of KFC is a self-service and quick response to the customers. The interesting
feature of the KFC chain is that it only serves chicken based products but are highly successful
worldwide. They have introduced a huge variety of chicken products in different forms. But
before discussing the product design of KFC let us know about the general product design of any
company and its important features. It is basically concerned with improving the service which is
providing to valuable customers. Like for a restaurant, by changing the menu or layout we can
change customer’s experience. To use a technique to design the service, there are certain plans
which are prepared. The managers have to consider people, material requirements, basic
infrastructure, and communication mean to design a service. The service must be accurately
designed to gain a competitive edge in the market and appeal to more customers. It is very
important to develop the right design for the personnel employed and for the financial growth of
a company. The service design basically involves re-organizing the activities in delivering
service to the clients. It could be by receiving emails from the customers or in person, telephone
or website. This could be done either by improving the existing service or creating new. The
concepts and ideas are basically stored in prototypes. With strong visual element and chance to
test it drastically improve the service and adds real value to compete in markets. [ CITATION
Eri20 \l 1033 ][CITATION Ass \l 1033 ][CITATION Ass \l 1033 ][CITATION Ass \l 1033 ][CITATION Ass \l
1033 ]

KFC daily operations manual clearly highlights each step of the sanitation procedure to ensure
strict compliance to the KFC requirement. Each staff has to undergo the Food Handler’s Course
conducted internally by KFC which is recognized by the Ministry of Health. KFC Malaysia have
implemented a hand washing procedure to ensure each staff washes his/her hands at least once
every hour and whenever necessary. The procedures include wetting hands first, then rubbing the
hands together, fingers between fingers, around the wrist and up to the elbow with liquid
antibacterial hand soap, for 30 seconds. Then the hands are rinsed with clean water under the
hands-free tap, and dried with single-use paper towels. No bare hands are allowed to touch any
finished products. Instead, KFC constantly stress on the importance of using disposable gloves,
sanitized scoops or tongs. All KFC restaurant teams including managers are immunized against
Typhoid upon employment. Besides, the product safety is also very important for KFC. KFC
took their products well above the minimum temperature recommended by WHO. KFC has
developed standards procedure that BTMP 2233 Quality Management 10 would minimize risk of
cross contamination between raw and products that ready to eat. KFC provide information on
then nutritional values of KFC products to assist customers on planning a wholesome and
balanced meal. KFC outlets have fallen way below the standards when it comes to cleanliness
and is characterized by distinct distasteful smell rather than the aroma of freshly friend chicken.
This phenomenon is due to reasons pointed below: Garbage of the entire outlet is thrown either
right outside or very near the entrance therefore causing repulsion in customers entering the
arena. KFC sees a high rate of customers every hour, with more guests coming in for breakfast,
lunch or dinner more will be the need to maintain the floors and the bathrooms due to increased
frequency of guests.

KFC should treat all the level of employees in the same way because team members do not get
any incentives or bonus. Pay should be raised. Team work is very important as there is no team
work in the store always there will be some or the other clashes between the colleagues. This
does not lead to company growth. Good recognition should be given to the hard working
employees it may be either part time or full time. Uniform and batch is not only important to the
employees but some identity cards should be given to know that they are the employees of the
KFC to get the discounts everywhere. More security should be given. I like the designing of the
software in the KFC because it checks the individual performance of an employee for example
sales done for each hour, offering large meals etc.

Every KFC restaurant are audited three times a year by our team of QA executives based on the
main attributes for KFC restaurant excellence - CHAMPS.

C - Cleanliness

H - Hospitality
A - Accuracy

M - Maintenance

P - Product Quality

S - Speed of Service

This YUM-owned audit program covers all aspects of CHAMPS such as cleanliness and
maintenance, sanitation and personal hygiene as well as product quality. It also takes into
account the speed of service, hospitality, personal safety, training and documentation. [ CITATION
Ass \l 1033 ]

We are mention KFC SWOT analysis below

Strengths

1. Second best global brand in fast food industry in terms of value ($ 6 billion). KFC is
known by many and is a trustworthy brand in many countries mainly due to its early
franchising and international expansion.
2. Original 11 herbs and spices recipe. KFC original chicken recipe is a trade secret and a
source of comparative advantage against firm’s competitors.
3. Strong position in emerging China. KFC receives half of its revenue from China, where it
operates more than 4,000 outlets. KFC position in China is one of its main strengths as
China’s fast food market is growing steadily.
4. Combination of KFC – Pizza Hut and KFC – Taco Bell. KFC partnership with other
Yum! Brands yields some advantage as the restaurant can offer items from its partners it
doesn’t have itself and satisfy more customers’ needs.
5. KFC is the market leader in the world among companies featuring chicken as their
primary product offering. KFC has positioned itself clearly among other fast food chains
bearing its famous slogan and trademark chicken products.
Weaknesses

1. Untrustworthy suppliers. Over the years, KFC has been contracting suppliers, which
supplied contaminated poultry to KFC or were mistreating chicken, thus resulting in
falling sales and damaged reputation.
2. Negative publicity. KFC receives much criticism from PETA over the conditions
chickens have been raised. Furthermore, it received bad publicity for selling chicken
wing with kidney. There are many more or less bad news from KFC, which damage
firm’s reputation significantly.
3. Unhealthy food menu. KFC menu is largely formed of high calorie, salt and fat meals and
drinks. Such menu offering prompts protests by organizations that fight obesity and
hence, decreases KFC popularity. Consumers also often opt out for healthier choices.
4. High employee turnover. Employment in KFC is a low paid and low skilled job. It results
in low performance and high employee turnover, which increases training costs and add
to overall costs of KFC.

Opportunities

1. Increasing demand for healthier food. While demand for healthier food increases, KFC
could introduce healthier food choices in its menu and reverse its weakness into strength.
2. Home meal delivery. KFC could fully exploit (it test deliver services now) this
opportunity and reach more customers.
3. Introducing new products to its only chicken range. KFC could introduce new meals to
its menu and offer pork, beef or only vegetarian meals, which would target wider
consumer group and would result in more costumers.

Threats

1. Saturated fast food markets in the developed economies. The fast food market in the
developed countries is already overcrowded by so many fast food restaurant chains and
this already proves to be a threat to KFC as it finds it hard to grow in the developed
economies.
2. Trend towards healthy eating. Due to government and various organizations attempts to
fight obesity, people are becoming more conscious of eating healthy food rather than
what KFC has mainly to offer in its menu.
3. Local fast food restaurant chains. Local fast food restaurants can often offer a more local
approach to serving food and menu that exactly represents local tastes. Although KFC
does a great job in adapting its own menu to local tastes, the rising number of local fast
food chains and their lower meal prices is a threat to KFC.
4. Currency fluctuations. KFC receives part of its income from foreign operations. That
income has to be converted into dollars and may affect the business' profits, especially
when the dollar is appreciating against other currencies.
5. Lawsuits against KFC. KFC has already been sued for many times and lost quite a few
lawsuits. Lawsuits are expensive as they require time and money. As KFC continues to
operate more or less the same way, there is high probability for more expensive lawsuits
to come.
 Analysis and findings

This paper is a good extensive for operational management of KFC. Now we will analysis the
operation management decision area for business organization. Our business organization is
Kentucky Fried chicken (KFC). We found that Heizer et al, (2017) defined ten operation
management decision areas for business organization. These are design of goods and services,
managing quality, process strategy, location strategy, layout strategies, human resources, supply
chain management, inventory management, scheduling and maintenance. But KFC are chosen
three operation management decision area for findings analysis. These are design of goods and
service, supply chain management and managing quality.

Design of goods and service: It is the vital role in operation management in global competitive
market. when the more attractive design of the goods and service, the more valuable product in
the market and customer will become more satisfied and attractive. Developing and
implementation are the main goal of the product design and service for the product strategy to
acquire the completive advantage in global market. So KFC is the exclusive brand in the world
that main featured in fired chicken which take advantage of the product selection, product
definition and product design strategies.

Every company have a selected best product by which the company can be easily identified.
KFC founder selected the chicken rather than beef, mutton and other meats. so KFC famous for
fresh Chicken. It offers a unique high quality product in the international market. Like KFC is
only available the product that comes from a unique recipe chicken 11 Combine of herb and
spices. Ingredients and flavors make unique and high quality products that represent a business
secret that’s called product definition. Any kind of company need to product design so that
customer is influenced. KFC is adding different item in their menu such as chicken burgers and
wraps, salads, desserts, side dishes and soft drinks. But KFC gives more priority customer likes
and dislikes and culture that’s why for cultural point of view KFC introduce new strategies that
known as ‘Go Global, Act Local’. For example, Malaysia and Indonesia are Muslim religion
countries that why they introduce the Muslim halal food. Thus KFC introduce the Muslim halal
food for the world wide of the Islamic issue. As a result, this business focused on the product and
mass customization. But their brand image is consistent and original recipe are not changed.
Managing quality: Quality management is the vital rule for the developed running business and
customer satisfaction. The main target is improving the quality increases production through
sells gains and reduced cost. Deming 14 points approach focuses first quality and then global
business (Bank, 2000). Considering the Deming 14 points, globally it divided into seven
concepts as continuous improvement, six-sigma, employment empowerment, benchmarking,
just-in time and knowledge of TQM tools. Fried chicken is KFC of mother product. But KFC are
changing their menu for India outlets. They are introducing vegetable menu and their slogan is
‘So veg, So good’. Thus, it is drive-through-window operation improves the speed of service. Its
original recipe with combination off 11 herb and spices even after more than 70 years for it
innovation and KFC maintain precision and reduce drawback in all product or goods. For quality
improvement, KFC maintain good working environment for employees and give to bundle of
opportunity such as the pension, retire medical and retire savings plan, training and motivational
activities boost up the employee’s mentality. KFC has described its own quality guidelines that
require direction for food safety and quality as well as quality risks, product manufacturing
procedures, equipment maintenance, facility standards and accounting control procedures. But if
the expectation is higher than the performance then the perceived quality that the giant customer
is less than satisfactory.

Supply chain management: KFC maintains the supply chain in three phases. Initially the
materials are purchased from multiple suppliers and stored in two different warehouses like
normal and cold storage. The product is grounded and sold to customers in the desired location.
The deficit is replenished three times a week through the final phase current warehouse. KFC
and its franchisees include approximately 6400 food and paper suppliers KFC and franchisers
purchasing policy items include chicken, cheese, beef and pork products, paper, packaging
materials and outsourcing or logistics and warehousing. Considering the six strategy KFC has
chosen many suppliers' strategies. The UK is usually the source of poultry from local poultry
suppliers and the rest from the EU, Brazil, Thailand. KFC McLane Food Services Inc. is the
main supplier to the United States and its own restaurants. In terms of logistics chain KFC is
working with DHL, QSL and Bidvest supplies. KFC supply chain risk Reduction strategies that
are effective for multiple supplier, monopoly and risk reduction. Another strategy is careful
selection, certification and monitoring of suppliers. Meet supplier welfare standards in the UK
and select RSCS suppliers and monitor activities in the UK. But recent experience in the UK is
not satisfactory. Due to the change in the supply chain, it causes chicken shortages that will give
the 900 out of February 2018 to face problems. This communication and relationship gap was
occurred. Wilding (2018) mentions it is important for managing relationships with existing or
former and upcoming partners as well as assistance. [CITATION SUP19 \l 1033 ]

Findings

In this report we are some findings in operation management of KFC. These are:

Supplier risk: Multiple supplier works in KFC, sometimes supplier monitoring or verification
are defecting often seen in other countries. But in UK suppliers fulfill the welfare standard, and
RSCS select supplier and monitor the activities in UK So they should activate in same rules in
other countries.

High price: maximum of the products is high pricing because of high cost in raw materials. I
think, they should follow the cost leadership strategies and must reduce the materials cost.

Update the menu item: they don’t emphasize the local dishes in any countries and they have not
breakfast menu. So breakfast menu and local dishes menu are included in KFC item so that
student’s and other middle class customer are satisfied.

Lacking’s of logistic supply chain: Logistic chain KFC worked with DHL, QSL and Bidvest
logistics. Sometimes raw materials are not reached in proper times as a result whole processes
delay for logistic. So KFC authority should be emphasized.

Communication and relationship gap: it faced chicken shortage that causes 900 outlets were
faced troubled in February 2018. This happened for communication and relationship gap in
customer and supplier. So KFC should aware of this situation so that don’t repeat that
occurrence.

In this analysis we find that without this drawback KFC is the best organization because of
provide the high quality product, maintain the CSR, product Differentiation, develop the product
design, improving product strategies for the competitive market and ecofriendly. So they should
have focused on the drawback so that reduce the problems. [ CITATION BBC18 \l 1033 ]
 Conclusion

In conclusion, this report find that KFC is a global company with a diverse and ever-changing
workforce, faces significant challenges in operating their businesses internationally but they face
those challenges strategically, adapt with policies to these markets in terms operations decision
areas and strategy. Also finds out, to do operations management and strategy Competitive
advantage. Each decision area and strategy is distinct from the other. Thus, and the right choice
of decision area is crucial for the convenience of their appropriate strategy. This report identifies
that KFC’s biggest strength is its brand image based on the colonel’s legacy and the quality of
his product design and the original chicken recipe that leads the market. But considering the
challenge, it is recommended that KFC pay more attention to the supply chain and cost
effectiveness. After analyzing all the topics, the following points are specially suggested at the
end of the study: Considering food safety and quality KFC should not have avoided any negative
criticism of any relationship with any unethical organization. KFC needs to introduce small
improvements through total quality management. Also this packaging material should be used
environment friendly. KFC will be able to take more advantage by its original recipe products as
an intellectual property.
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