KFC Corporate Strategy

Vision & Mission

Vision

“ To be a premier consumer company in Indonesia”

Mission

“ To develop a portofolio of well-run and fast-growing consumer companies”

“ To focus on building a premier ecommerce business in Indonesia"

Milestones

2015

2013

2000

The Company acquired a strategic interest in a fiber optic network developer - PT Mega Akses Persada – to provide communication infrastructure through out Indonesia

The Company acquired strategic interests in three companies operating in retailing, quick service restaurants and food industries

1995

On 21st November 2000, the Company made an initial public offering of 64,000,000 shares at Rp 250 per share on the Jakarta Stock Exchange

PT Dyviacom Intrabumi was established on 16 November 1995 under Deed of Establishment No. 107 made before Notary Siti Pertiwi Henny SH, in Jakarta

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Public (with ownership of less than 5% respectively)

35,8%

Hannawell Group Limited

71,9%

Treasure East Investments Limited

PT Megah Eraraharja

31,5%

40,0%

KFC Vision & Mission

Vision

"Always be the No. 1 quick service restaurant brand in Indonesia and maintain this market leadership by being the most modern and favorite restaurant in terms of product, value, service and assets"

Mission

• "Constantly strengthening KFC brand image through innovative strategies and ideas"
• "Continuously providing unparalleled customers’ dining experience"
• "Consistently providing quality products, services, and assets suited to customers’ changing needs and taste"

KFC Indonesia Brief History

2013

1997

PT Megah Eraharja sold and transferred all its shares ownership to PT Indoritel Makmur International Tbk

1993

The ownership of KFC franchise was treanferred to Tricon Restaurant International (then become Yum! Reastaurants International)

1986

The Company conduct initial public offering as public listed company in Indonesia Stock Exchange. Company code is FAST

1978

Kentucky Fried Chicken Corporation was acquired by Pepsi - Cola International. Pepsi-Cola International appointed Pepsi - Cola Overseas Ltd. as the KFC franchise owner in Indonesia

The Company was founded after the Galael Group acquired the franchise rights of KFC brand for the whole Indonesia from Kentucky Fried Chicken Corporation

Ownership Structure

KFC Core Competence

Kentucky Fried Chicken (KFC) stands for high-quality fast food in a popular array of complete meals to enrich the consumer’s everyday life.

KFC Business Units

Delivery order

Birthday Parties

KFC coffee

Drive-thru

Catering

Inclusive CDs Consignment

KFC Key Financial Performances

• Positive trend on total revenue from sales, but the rate of growth is slowing down, especially from year 2014 to 2015.
• As a result of the foregoing increase (for materials and operating expanses), operating profit for 2015 declined from Rp. 205,46 billion in 2014 to Rp 123,84 billion in 2015. It's arround 39,74 percent decreasing.
• Company continuously pushing in store development growth, making their presence felt as well as strengthening and creating a well prepared network when the economy rebounds .

Where we are now...

We analyze the firm's current condition of KFC Indonesia, we found that;

• Sales volume peaks
• Decreasing growth rate of market share
• Profits start to decrease
• Efficiency maximized through increased knowledge of operations

1979

KFC’s Indonesia first outlet opened in Jakarta

based on work from Gort and Klepper (1982) about classification of firm stage, we conclude that KFC Indonesia is in the Maturity Stage

Source: Gort, M., and S. Kleppr. 1982. Time path the diffusion of product innovation. Economic Journal 92 (367): 630-653.

Position in the market

High Price

Low Variety of Product

High Variety of Product

Low Price

Strategy Evaluation

• Develop and instill a deep and strong culture within the organization that encourages all of the employees to be innovative as much as “out of the box”
• Develop consumer’s engagement that allows the company to provide beyond satisfaction beyond expectation
• Provide competitive brand differentiation through innovative ideas and strategies
• Maintain high quality human resources with solid focus on competency and capability development
• Develop more on the IT technology aspect while improving the quality of the KFC’s overall system

To ensure market leadership in QSR market in Indonesia

Generic Business Strategy

KFC is using cost leadership strategy

• KFC brought the lowest price in the market among its competitors
• Providing indoor seating might seem increasing expenses for KFC - Many drive-thru stores in order to keep it low cost
• Offering product modification with low prices that allows consumer to satisfy various demands
• Able to keep prices low through a division of labor that allows it to hire and train
• Yielding low margins that can make it difficult to compete

Integration - Responsiveness Framework

KFC is using Multy-domestic Strategy, because;

• The company combines the benefits of a high localization strategy while maximizing with the global-standardization strategy

- Stretch the boundaries to cover more to Indonesia’s consumers demand toward taste and product differentiation

• National responsiveness reflects to an adaptable marketing strategies while achieving KFC objectives

- Since KFC opens the restaurants not only applying the US concept

• KFC is balancing and creating the right fit between global and local motives → think globally, act locally

KFC Porter’s Diamond of National Competitive Advantage

• Through franchising system, KFC builds standardization from store locations to distribution of the products.
• Chains that are easily found in every strategic area of the city and sometimes offer lower products than the rivals.

Competitive intensity in local industry

Factor Conditions

Demand Conditions

National Competitive Advetntage

• Cafe-based concept is developed due to rival market condition that elicits KFC to satisfy more varied customers’ demands.
• Enlarging products through innovative menu such as healthy concerned menu, seasonal menu, etc.

• Well-trained human resources are the keys to KFC while maintaining quality of its chains as well as products.
• Potential rising growth and income triggers KFC to expand its chains to larger area.

Related & supporting industries/complementors

• Cooperated with Yum!Inc. in order to set the target higher and can satisfy the demands toward varied products in the market.
• Strengthen the market demand through providing opportunity to be cooperated with music label companies.

Innovation Process – Idea Innovation Graph

Creation of testing product

Food Innovation team brainstorms ideas and analyses general market research for trends and customer interests

A new product concept is taken to senior management team for approval for testing phase

Initial development of product begins with chef and product innovation team

Product testing with group up to 16 consumers to take and give feedback

Product packaging development begins

Product testing

Product is updated based on feedback

Final product testing

Product goes to market

If product is successful, competitors may try to imitate

Type of Innovation

Why?

• KFC has been shifting their targets from families to younger generations
• by providing new variant of menu (kfc float and KFC cheese) and establishing KFC Coffee

Supply Chain Management

Contact Supplier

• KFC main raw materials (Chicken and mashed potatoes) determined by the head office supplier
• Highly perishable items (bread, beverage puree, vegetables, milk, etc.) provided by the district level

KFC

Customer

Retailer

Distributions

Contact Supplier

Corporate Strategy

KFC Supply management process

Backward Vertical Integration

Type of Vertical Integration

Taper Integration

• Backwardly integrated
• Relies on outside market

Make-or-Buy Continuum

Adventage

"Buy"

• Provide products with a high standard of quality, safety, and halal

• KFC engaged in long term agreement with some of its suppliers
• Except for seasoning, none of the other input produced by KFC

Disadventage

• Enforcement of contracts, Opportunism

The Resource-Based View

Intangible resources;

• Culture
• Knowledge
• Brand Equity
• Reputuation
• Intellectual Property

Tangible resources;

• Labor
• Capital
• Land
• Building
• Plant
• Equipment

KFC VRIO Framework

KFC may not be difficult to imitate in aspect of the product but its functionality is very difficult to achieve.

KFC combines the benefits of a high localization resources while maximizing quality of product & sercvices with the global-standardization.

KFC is always ready to exploit new resources and the organization structure is well organized. It provides a good support to its franchise operations.

KFC hold a high value in according to its brand image and exploitation of available resources which had helped it evolved successfully for more than three decades.

Sustained Competitive Advantage

Conclusion

KFC sedang berada pada stage maturity dan menikmati benefit dari competitive advantage yang dimiliki dalam persaingan sektor bisnis makanan cepat saji.

Inovasi dan efisiensi yang telah dilakukan KFC melalui kebijakan strategis perusahaan (seperti yang telah dibahas dari aspek positioning, dan manajemen resources) telah menghasilkan nilai tambah bagi perusahaaan dan meningkatkan daya saing usaha.

Namun demikian, dampak pelemahan mulai terlihat berimbas pada KFC, entah disebabkan karena pelemahan ekonomi, atau bisa juga merupakan imbas laten dari stage maturity.

Suggestion

Merubah visi anggaran untuk dialihkan kepada pengembangan produk dan inovasi bisnis

Mencari potensi pangsa baru, seperti golongan vegetarian