External Environment of KFC: aspects to consider for strategies

Solution Preview

External Situation Analysis for KFC:

Opportunities

Opportunities represent external finding which can enhance a company's performance. Opportunities that KFC can take advantage of are as follows:

1. The Mexican market, which offers a large customer base, lesser competition, and close proximity to the US.
The growth in the fast-food industry is limited due to the aggressive pace of the growth in the 70's and 80's. As a result, the market is saturated and "the cost of finding prime locations is rising." With the higher cost of the initial investment, the new restaurants are pressured to increase per-restaurant sales. Many companies are realizing that in order for them to grow they need to pursue foreign market. One of the potentially profitable markets is Mexico. Mexico has over 91 million people and growing. This give companies a huge customer base to work with. Also, the companies are able to take advantage of the close proximity to the US. The transportation cost to Mexico compared to other countries is very minimal. Despite the advantages, US companies in general have not expanded much in the Mexican market compared to European or Asian market. Therefore, the companies can expect lesser competition when expanding in Mexico.

2. Peso devaluation has made it less expensive for US to buy assets in Mexico.
US companies are able to invest less money in buying assets in Mexico due to favorable exchange rate. This opportunity gives the companies a reduced risk in investing in Mexico. Also, the companies that are already in Mexico are able to import raw materials at a favorable rate by converting dollars into peso.

3. "Dual branding" helps to appeal to the wider customer base and also provide higher profit.
This strategy helps to "improve economies of scale within its restaurant operations." For many companies that own more than one fast-food chain, "dual branding" is an ideal way to expand quickly and increase profit. The companies no longer need to wait for the store to be built or spend time and money looking for the location. By adding a brand to the existing fast-food store, the companies are able to expand quickly and for less money. The companies are also capitalizing on the increased customer base due to the ...