global business strategy topic kfc vietnams global business strategy

NATIONAL ECONOMICS UNIVERSITY ADVANCED EDUCATION SCHOOL

GLOBAL BUSINESS STRATEGY

TOPIC: KFC VIETNAM’S GLOBAL BUSINESS STRATEGY

GROUP 8

Bui Thanh Giang 11204990 Nguyen Thi Minh Hanh 11201374 Nghiem Thi Khanh Linh 11202162 Nguyen Thuy Ngan 11202759 Tran Dam Tien Dat 11200762

Instructor: MBA.Tran Trong Duc Ha Noi, 2023

CONTENTS

1 Introduction 2 2 PESTLE and Value Chain Analysis for KFC in Vietnam 2 2.1 PESTLE AntnalySts ccccccccccccccccccccsecceeccseecssecesseccseeccsesscsessseesssessssessieesssesstseesessaeesed 2

1 Introduction

KFC Corporation, doing business as Kentucky Fried Chicken (KFC), is an American fast food restaurant chain headquartered in Louisville, Kentucky, that specializes in fried chicken It is the world's second-largest restaurant chain (as measured by sales) after McDonald's The chain is a subsidiary of Yum! Brands, a restaurant company that also owns the Pizza Hut and Taco Bell chains Today, the KFC chain is present in 145 countries and territories around the world, with more than 27,000 restaurants serving 12 million customers every day

In 1997, KFC opened its first restaurant in Ho Chi Minh City in Vietnam Until now, this fast food restaurant chain has expanded its presence to more than 172 restaurants in 39 provinces of Vietnam, providing jobs for more than 4,000 people and making a significant contribution to the Vietnamese fast food industry as well as the formation of a new consumer habit and culinary culture in areas where KFC is present

2 PESTLE and Value Chain Analysis for KFC in Vietnam 2.1, PESTLE Analysis

2.1.1 Political factors

Vietnam is one of the most politically stable countries in South East Asia Since Vietnam becomes a member of WHO, Vietnamese’s government has issued a lot of policies that benefit Foreign Direct Investment ( Resolution No.103/NQ-CP issued on August, 29th, 2013) While state speculations have been diminishing fundamentally and non-state ones are as yet experiencing issues in the land, gold and outside trade markets; KFC is popular for fast sustenance retails, yet additionally its interest in land As "Business offices Lease" establishment, the franchisor (KFC) has rights to repurchase all benefits after the principal business year, and after that expand 20 business years more for the franchisee when the primary time frame of the agreement is finished This term of the agreement conveys a significant spread of repurchase to McDonald' s This kind of land speculations is very new in Vietnam It tends to be said that KFC has been taking focal points of areas successfully by getting benefits from repurchasing resources and commanding primary vehicle driving headings to give its unmistakable administration "drive-through"

Second, Vietnam political circumstances should be steady right now and there would very few changes in guidelines just as regulatory frameworks of the Vietnamese government in the following years This is one of the significant elements which help business visionaries manufacture their correct techniques in light of the fact that political

circumstances greatly affect local utilization Next, to these above focal points of political status in Vietnam influencing KFC methodologies, there are as yet minor preventions Despite the fact that our administration has been urged enterprises with FDI to put resources into Vietnam, there have been various confounded methodology and archives Also, Vietnamese managerial controlling frameworks are not unequivocal, the defilement still exists in an assortment dimension of power These actualities are tedious and cause an out of line rivalry

2.1.2 Economics factors

Vietnam now has the fastest-growing middle-class in South East Asia Tax rates are an important factor affecting business operations, mainly revenue Currently, the tax rate that the State applies to the food industry increases So when the tax rate increases, the price of products increases, affecting consumer demand This is an objective factor under government control So this is also a challenge for businesses to still comply with tax rates and maintain and develop sales

Currently, the world is recovering the economy after the crisis Vietnam is only slightly affected by other countries and now the economy is in a stable and developing stage Therefore, people's income is increasing again KFC often builds and develops businesses in big cities, where consumers have a high income In particular, per capita income in these places is currently growing strongly, with high living standards and increasing consumer demand Increasing people's income will be an opportunity for KFC to attract customers to develop products and improve sales

With its objectives are medium-and top of the line classes of clients, KFC doesn't need to stress over the market when Vietnam has a quickly developing economy with in excess of 90 million individuals who all need a sample of American cheap food

2.1.3 Social factors

In the current market economy, life happens so quickly that people do not have time to prepare home-cooked meals So consumer demand is increasing and this is an opportunity for KFC to increase revenue and brand development

Not only that, KFC has succeeded in hitting the psychology of Vietnamese people in general, it is to like foreign brands, to change skillfully to match the eating habits of Vietnamese people such as supplementing rice and household dishes; building a warm and comfortable space to serve the gathering of Vietnamese people as well as the attentive staff attitude These are the points that KFC succeeded in capturing Vietnamese psychology.

2.1.4 Technological factors

This is an environment with many changes and changes constantly Vietnam is a country with a high speed of internet users in the top 6 of Southeast Asia and the top 20 in the world Vietnamese law also enacted a number of laws relating to e-commerce transactions and encouraged businesses to use high technology for their production and business processes The application of technology in business is essential for businesses Especially the strong development of the social network like Facebook with more than 24 million Vietnamese people use This is the strong point of Vietnam when KFC can fully implement programs to promote its products and brand via the internet; reach a huge number of users

2.1.5, Legal factors

Vietnamese food legislation provides certain guidelines for the use/addition of vitamins, minerals and nutritive substances in food, or the maximum amount of those allowed for foods The national technical regulations set forth certain requirements regarding the number of vitamins, minerals and nutritive substances that can be added to food For functional foods, health supplements and medical foods, Circular No 43 also sets forth Recommended Nutrient Intakes (RNI), which governs the maximum amount that manufacturers may add to such foods In addition to regulations on food hygiene and safety, KFC needs to consider the commercial rights of products, especially Vietnamese franchise law Vietnamese franchise law applies to franchising activities between Vietnamese parties, to a foreign franchisor who grants a franchise to a franchise in Vietnam, and to a Vietnamese franchisor who grants a franchise to a franchisee in a foreign country Furthermore, KFC must also indicate whether it is a primary franchisor or a subfranchisor and whether it has registered the franchising activities with the appropriate agencies

2.1.6 Environment factors

Vietnam is blessed by nature, with great ecological and hydrological diversity Thecountry is made up of equatorial lowlands, high-temperate plateaus, and cooler mountainous areas When joining Vietnam, KFC is aware that people are very concerned about environmental issues Therefore, KFC always wants to protect the environment as much as possible, right from the production stage The chicken farms of KFC always follow a strict process of ensuring environmental hygiene, chicken flocks are always

ensured healthy and well cared Therefore, KFC's chickens are always healthy, avoiding epidemics Poultry disease is always a painful problem in Vietnam KFC always checks to make sure there are no sick chickens The slaughter process is also guaranteed to be absolutely hygienic when KFC automates the company's food production line, each of which is slaughtered in a sanitary manner, carefully packed and preserved when go to the store Hot and humid weather in Vietnam is always a challenge for product preservation, KFC also anticipated this when the company has equipped all of its stores with the modern frozen system, ensuring products always in the freshest condition possible when coming to the user For each piece of broken chicken or expired use of the company's regulations, KFC has its own treatment process to ensure that no excess products are leaked causing unsanitary and environmental impacts

2.2, Value Chain analysis: 2.2.1 Core activities: 2.2.1.1 Supply:

Quality of Raw Materials: KFC ensures that raw materials such as chicken, spices, and other ingredients meet high-quality standards For example, chicken is carefully selected and processed to ensure deliciousness and food safety based on Five Freedom commitments (freedom from hunger/thirst, discomfort, pain, to express normal behaviours, fear)

Supply Chain Management: KFC’s approach to supply chain management blends precision with innovation By harmonizing traditional quality control practices with cutting-edge technologies, KFC ensures the seamless flow of ingredients and products across its global network of restaurants The company’s emphasis on strong supplier partnerships fosters transparency and reliability, enabling consistent ingredient quality With advanced data analytics driving demand forecasting and inventory management, KFC strikes a balance between meeting customer expectations and minimizing waste

2.2.1.2 Production/Operations:

Centralized Production Model: KFC often applies a centralized production model in large manufacturing centers to achieve uniformity and high efficiency in the production process For example, KFC restaurants worldwide typically use the same process for preparation and cooking.

Standard Operating Procedures: KFC establishes standard operating procedures to ensure the quality and consistency of products For instance, each branch may use the same spice formula and cooking methods

2.2.1.3 Inventory/Distribution:

Inventory Management: KFC maintains inventory management systems to ensure that raw materials and products are always fresh and ready for use For example, they may use smart inventory management systems to track stock levels and automate ordering when necessary

Optimized Logistics: KFC may use logistics strategies such as shortest supply chain delivery to reduce the time between production and delivery

2.2.1.4 Marketing/Sales:

Brand Image: KFC builds a strong brand image through advertising and marketing strategies For example, advertising campaigns featuring the "Kentucky Fried Chicken" image have become an iconic representation of the brand

Sales and Promotion Strategy: KFC frequently organizes promotional programs and discounts to attract customers For instance, they may introduce special meal deals during specific occasions

2.2.1.5 After-Sales Service:

Customer Care: KFC maintains customer care services to address queries and feedback from customers For example, they provide contact channels such as telephone hotlines, emails, and a website for customer inquiries

Customer Loyalty Programs: KFC may offer customer loyalty programs, such as membership cards or mobile apps, to encourage customers to return and accumulate points for rewards

2.2.2 Supporting activities:

Procurement and Supply Chain Management: KFC likely engages in strategic procurement to secure cost-effective and high-quality inputs Effective supply chain management ensures the timely availability of resources For example, they may negotiate contracts with suppliers for bulk purchases of ingredients

Facility Management: KFC's business operations involve managing various facilities This includes the maintenance and optimization of restaurant equipment,

ensuring a clean and hygienic environment, and managing logistics for the transportation of goods

Rerearch and Development: Recently, KFC has carried out several research and development campaigns Eg: In 2020 Global Chicken Key Welfare Indicators: Mobility while chickens are raised: Overall health/minimization of medical interventions; Chicken mortality; Mental and physical stress; In 2021, Yum!: Global Cage — Free Ege Commitment; Yum!: 2020 Citizenship Report Yum!; in 2022: KFC U.S Beyound Friend Chicken Nationwide

Human Resource management:

Recruitment and Training: Effective human resource management at KFC involves recruiting skilled staff and providing them with training to maintain service quality This includes training for kitchen staff, customer service representatives, and managerial personnel

Employee Engagement: KFC likely emphasizes employee engagement to enhance workplace satisfaction and productivity This could involve implementing employee recognition programs, fostering a positive work environment, and providing opportunities for career development

Operation management

Strategic Management: KFC's strategic management involves setting long-term goals and developing plans to achieve them This includes market analysis, competitor evaluation, and decision-making regarding market expansion or product diversification

Operations Management: Day-to-day operations management ensures smooth functioning of KFC's outlets This includes monitoring inventory levels, optimizing production schedules, and implementing quality control measures

Financial Management: Effective financial management ts crucial for KFC's success This involves budgeting, financial analysis, and decision-making to allocate resources efficiently It may also involve financial planning for new initiatives or expansions

Risk Management: KFC likely engages in risk management to identify potential threats to the business and develop strategies to mitigate these risks This could involve assessing market trends, monitoring food safety regulations, and preparing for potential supply chain disruptions

3 Analysis of KFC Vietnam’s competitive capabilities 3.1 SWOT Model of KFC Vietnam

3.1.1 Strengths

Reputation: KFC belongs to the world-famous Yum Group, as well as the KFC brand has been gaining the trust of Vietnamese consumers, this is a strong point that helps KFC easily expand its distribution channel network

Distribution channel system: KFC's distribution channel system is door-to-door delivery type, fast and convenient for customers This is a perfect and convenient type of distribution for customers

Service style: Service style Polite and professional service suitable for fast food style In particular, equal service is the same for all customers

Financial resources: Is a brand belonging to one of the four companies of the Yum! one of the world's largest retail technology corporations It is because of this strong support that it creates a competitive advantage for KFC in any market

Business location: KFC stores are always located in the most beautiful and convenient locations for customers, right in front of large, airy roads In addition, KFC also chooses locations such as supermarkets and shopping centers where there are a large number of shoppers

Products: KFC products are always guaranteed by authorities with full safety and quarantine standards

Additional services: KFC stores always have free parking to make it convenient for customers when coming to KFC's stores In addition, KFC's door-to-door delivery program also does not charge any shipping fees

Marketing system: KFC's marketing system is not really strong Although it is a famous brand, the KFC brand is only known in big cities without high coverage

3.1.3 Opportunities

Consumer income increases: Currently, with the government's stimulus packages, the financial crisis is gradually being overcome, and Vietnam is considered to be on the list of

countries with economies that recover quickly after the pandemic crisis Therefore, consumer income is gradually increasing again

Boom in demand: Recently, the boom in demand has created a wave of strong development in the service sectors Especially in the fast food segment, consumers increasingly seek out familiar global brands rather than other conventional eateries

Strict demands on safety: As consumer income increases, people have stricter demands on the reputation of product suppliers, to better ensure their health With reputation and input materials that are always certified for safety and fully quarantined, this 1s an opportunity for customers to choose KFC products

Bird flu: With prolonged waves of bird flu, consumers are becoming more cautious in choosing safe food for themselves, so consumer tastes are gradually shifting from restaurants sidewalk to larger, more prestigious stores

Sidewalk cleaning policy: With the government's sidewalk cleaning policy, it contributes to significantly reducing the number of competitors in the fast food market in Vietnam

3.1.4 Threats

Competition: Currently, in addition to KFC, Lotteria and Jollibee are three foreign brands that are doing fast food business quite successfully in Vietnam with the main dishes being fried chicken, burgers, fries and carbonated soft drinks These stores on average attract about 200-300 customers/day and at peak have from 400 to over 1,000 customers/day Besides, there is the presence of McDonald's and Starbucks, two leading American brands that are creating a fierce race in the fast food industry

Substitute products: In addition to direct competitors, KFC also faces a domestic but no less thorny competitor, Pho 24 - Trung Nguyen, a Vietnamese fast food brand that is growing strongly on the world market as well as not leaving behind the domestic market In addition, in large cities today, KFC also has to confront family restaurants that are quite familiar in the lifestyle of Vietnamese people such as pho, noodles, broken rice, and banh mi

3.2, Competitive strategy of KFC Vietnam

When entering the Vietnamese market, KFC has successfully executed focused differentiation strategy in its chosen domain - the fast food industry In the early day, KFC targeted customers with middle and high incomes, especially young people in major cities across the country and then expanded its chain stores to busy areas in the other big