The Effectiveness of Five Forces of Professor Michael Porter for KFC Business Model
Introduction
Fast food business serves food such as hamburgers and sandwiches, it is a popular business around the world and it has many brands, it can be local or global brand, the local one offers more traditionally prepared foods, But global food concept is one of the most popular around the world these include many popular global chains such as McDonald’s, KFC and Burger King, amongst many others. KFS was discovered in 1952 by Colonel Sanders, also recognized as Kentucky Fried Chicken is one of the popular fast food restaurants. It’s headquarter is placed in the United States. The main food item is fried chicken but also it sells salad and sandwich. They have shops in 109 countries and KFC runs more than 5200 restaurants and 15000 parts around the world. Every day more than 12 million consumers attend KFS shops around the world. The annual income of KFC is more than $25 billion. KFC has many important plans for their growth, for instance, they offer various menu, dessert menu and buffet also they are trying to start small food count around hospitals, universities, stadiums, shopping malls, and airports. Another purpose of KFC is to obtain customer satisfaction. They are offering healthier meals than others. They try to be quicker and also closer to consumers to attract more customers. Similar to other businesses, there is a strong conflict between fast food restaurants and we can estimate and assess this competition with a structure called Porter’s Five Forces. Porter's Five Forces were produced in 1979 by Professor Michael Porter of Harvard Business School as a simple framework for estimating and evaluating the competitive intensity and situation of a business organization. Five Forces are valuable in knowing the power of an organization’s current competitive position, and the future position of the organization. Also, it helps new entrants on how to be a success in their business and understand whether they can succeed in their business or not. It helps existing organizations to understand whether the new product will be profitable or not also help them to understand how to compete with rivals. These five forces are a power of supplier, threats of the customer, rivals, product substitution, and new entrants. The aim of this paper is to investigate how effective the five forces of Professor Michael Porter for the KFC business model. To be clearer we have made a survey in Kurdistan to illustrate how the five forces influence KFC and also what are the shortages and strengths of KFC in Kurdistan. We have asked some questions related to Porter’s five forces and we have collected and analyzed them. Keywords: Fast food, KFC, Porter’s five forces, Survey, Kurdistan
PORTER’S FIVE FORCES ANALYSIS
The purpose of the following investigations is to illustrate the state for kfcamongst rivals and describe the ways that the corporations can increase theirservices and goods. they help businesses or organizations to find the way ofsuccess and to be able to compete with rivals. it is suggested for companies to control these five forces if they succeed to control these five forces then that company or organization will be able to hoard that business .the porters fiveforces are:
· Threats of new entrants
KFC is professional for browned chicken and also chicken goods are hard to fake that’s why they are convinced about their own goods and it is hard for entrants to copy but still kfcs services and goods are getting hard competition from rivals such as radix. radix fried chicken has become attractive because it gives a fresh menu and this has demanded by numerous clients. still kfc has the ability to be fully known and this has made it very common around the world. it is comfortable for consumers to prefer kfcrelated to other new fast food restaurants unless the new players offer various or better menus as compared to the existing restaurants. the current brandshave their mark icon so strong and they have numerous loyal coutomer everywhere. these clients avoid moving to other brands than these particular restaurants. so according to these examples the threat of new entrants is medium for kfc. Although kfc has the power of being well recognized and this has made it very famous around the world but buyers always seeming for better quality and price it means if they got another brand that offers better quality and lower cost they will switch especially in kurdistan because in kurdistan kfc doesnt have a real competitor so customers inevitably visit kfc if they found another brand like macdonald which offers better quality likely they will switch because most of the people in kurdistan are not satisfied with kfc's cost 48% of people think that they have a problem with kfc price and i think if another brand try to serve in kurdistan such as macdonald the customers will benefit because the competition will occur between both brands and the price will decrease and also the new brands will have a good chance to succeed if they compete by price.
· Power of supplier
Kfc's relationship with their suppliers is in a great position .the influence of suppliers against kfc is at a low level there are some reasons for that one of them is having a high degree of orders and a huge amount of suppliers. also suppliers cannot increase the price of materials because there is a huge number of suppliers who want to have a contract with the kfc.kfc can easily switch from one supplier to another for example in 2004 KFC eliminated their work with one of their raw material suppliers because KFC did not like the way or the procedure that they obtain raw materials from them. The main raw material for KFC is chicken and chicken is very easy to obtain that's why suppliers cannot have any force against kfc and also they cannot raise the price of raw materials because if kfc feel that the raw materials price is high they will easily switch from the current supplier to a new one. power of supplier is the lowest force against kef’s business model other four forces accept the threat of new entrants force are in the highest level and kfc must be aware of them and have a plan for each of them to retain the competition among rivals.
· Power of customer
It is clear that consumers are looking for the brands which offer services at an efficient price so if there is a competition between brands it is obvious that the price will decrease. if customers feel that the services which they get from a brand have a high price simply they will neglect that brand and they will switch to another brand with lower cost. Because of having stiff competition between fast food restaurants so the brands such as kfc and McDonald cannot increase their services prices. according to my survey 92% of people believe that if they find another fast food brand that offers better quality they will switch from kfc without thinking about its brand only 8% of people said that they will not change current fast food or they will not switch from kfc even if they find another brand with better quality it shows that the bargaining power of customers against kfc is high. the strongest force that affects any firm is customer can easily destroy a firm just by switching that firm in another word the customer is the boss businesses shouldn't behave in ways that customers don’t like and they always must take care of customers more than anything else the customers are the biggest resources and also the most valuable resource it is better to work on customers loyalty than or obtain new customers kfc almost succeed.
· Threats of substitute products
There are several other fast food establishments that give similar products as KFC but KFC try to survive in this fight for instance KFC has raised its game by giving Wi-Fi services and also offering morning services. In many countries in which KFC runs it is facing replacement by local restaurants such as Arabic fried chicken in the Middle East region and also in Iran they have Akbarjuje which have stiff competition against KFC. Thus the threat of substitutes is high for KFC. threats for KFC is replacement by huge series of the world as Hardees has newly started in Pakistan and this can produce replacement goods of KFC and KFC is not equipped for that although the threat of substitutes is high for KFC but still competitors or new entrants have a lot of work to be done to defeat KFC because according to my survey most of the people are think that the KFC has a good variety of items 48% of people are satisfied with the variety of items which KFC offers also according to my survey products such as beef and fish could be a suitable substitute for current items or suitable new items 48% of people want a beef to be a new selective option in KFC menu also 36% of them want a fish to be an option so if the KFC or competitors want to substitute or add some item the best choices are beef and fish because they are recommendable by people.
· Competition among rivals
KFC has a conflict with many other global brands particularly with MacDonald’s they have great competition that’s why KFC has begun to perform some mechanisms to have an effective competition one of them is producing smart cards for kids to offer them discounts. the force of rivals on KFC is at large rate because some of the main service objects are alike such as fried chicken salad drinks that's why KFC and also other fast food brands have a tough job to survive in competition and also as I discussed above consumers are looking for better services they will easily switch from one brand to another one 92% of KFC‘s customers have said that they will switch if they find that another brand is serving better than KFC. I think KFC have performed something useful to retain their customers for instance according to my survey 68% of customers were agree or satisfied about the way that KFC is serving them and also %60 of customers were agreed about KFC’s quality of items but it does not mean that KFC has left other competitors and the threat of competitors against KFC is low because other competitors are fighting and also they have many useful and effective offers to their customers.
Conclusion
We have made research to illustrate how Professor Michael Porter’s five forces influence KFC and also what are the shortages and strengths of KFC, beside these We have made a survey in Kurdistan to make the research clearer. We have asked some questions related to Porter’s five forces and we have collected and analyzed them. As a result, we have found that the power of suppliers against KFC is low because there is a large rate of orders and a huge number of suppliers whose try to work with KFC, so suppliers cannot increase the price of raw materials. KFC can easily switch to another supplier if they feel that the current suppliers aren’t working in a way that they want. But the bargaining power of customers against KFC is very high because customers are looking for brands which offer services in efficient price and better quality if they feel that the services which they get from a specific brand have a high price simply they will switch to another brand which offers services with lower cost. The customers play a critical role in all businesses and they have the most powerful force to the businesses they can simply destroy a business just by switch the brand. According to my survey, 92% of people believe that if they found another fast food brand that offers better quality they will switch from KFC toward that brand. Although the threat of product substitutes is high for KFC still competitors or new entrants have a lot of work to be done to compete with KFC because according to my survey 48% of people are satisfied with the variety of KFC items. A product such as beef could be a suitable choice for substitute items because 48% of people want beef to be a new selective option in the KFC menu. The threat of competitors against KFC is high because some of the main service items such as fried chicken, salad, drink are common that’s why it is hard to remain in competition, and also as I mentioned above that customers are looking for better services they will easily switch from one brand to another if they feel that they can get better services from another brand. Although KFC has the advantage of being well known and this has made it very popular around the world but customers always looking for better quality and price, it means if they found another brand that offers better quality and lower cost they will switch, especially in Kurdistan because in Kurdistan KFC doesn’t have a real competitor so customers Inevitably visit KFC, but if they find another brand like MacDonald which offers better quality likely they will switch, because most of the people in Kurdistan are not satisfied with KFC’s cost , 48% of people think that they have a problem with KFC price, and I think if another brand try to serve in Kurdistan such as MacDonald, the customers will get benefited because the competition will occur between both brands and the price will decrease, and also the new brands will have a good chance to succeed if they compete by price. There is a problem in Kurdistan which has a bad effect on customers, this problem is lack of competition means there is no a global brand which tries to compete with KFC, that's why KFC can easily play with the cost and also with the price of items, if there were some competitors such as McDonald's the position of KFC according to Professor Michel Porters five forces definitely would change and it will make some limitations for KFC to play with the cost and quality of items.
References
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