KFC marketing story - part 4

Hi guys,

It’s me again. Today I come back with the forth part of the Marketing story of KFC. This time, the topic is about the business market that related to the firm. As usual, we will go deeper to this topic by the form of answering some specific questions.

Let’s start!

14. Although your product is a general consumer product it may be sold in business markets. Is it so for your product? And if yes in which business markets is your product sold? (Most consumer products do have a relation to business markets, in doubts if that is the case or not discuss with your fellow students and/or contact your teacher)

KFC does have a relationship with business market but in a form of transferring its brand name to branches in foreign continents. In the situation of KFC, the firm does not sell its dishes to another business; instead, as mentioned, it only trades its brand name and holds the copyright by several-million-dollar contracts. KFC will not 100% control the activities of the restaurant after delegation, the company from then only has periodical percent share of profit from branches.

This transaction can be considered to happen in reseller markets. In this case, KFC is the wholesaler who supply brand name and receipts of chicken dishes; and affiliations around the world are retailers who purchase products and resell them to final consumers. (Dibb, Simkin, M.Pride, & Ferrell, 2012, p. 181) These restaurants have a very big impact on consuming process. To be more precise, they may evaluate the local market to decide in what quality, quantity and at what prices the dishes can be sold; they can even develop and change the menu in conformity with the taste of people. (Dibb, Simkin, M.Pride, & Ferrell, 2012, p. 182) For example, in Vietnam, KFC add rice with chicken dishes to the menu beside the original dishes, while in Australia, the firm gives supplementary dishes of many types of slider.

15. Has your product been adapted to the business markets? If so describe how.

I personal believe that KFC has adapted well in the business market. Under the transferring form of brand name, the activities of KFC have been expanded worldwide effectively, which assists the firm to become one of the leaders in the fast food industry. It cannot be denied that when entering some specific markets, KFC experienced a number of difficulties of market share, competitors, money supply as well as undesirable profits, but the firm has seen prosper currently. For instant, in China market, until the first quarter of 2015, sales had been tanking for three years in China and fell 10% in same period (Lutz, 2015), but after more than a year, KFC China had had a better performance than the parent company, Yum!, expected in the second quarter, after a two-year slump sparked by a food-safety scare, bird flu outbreak and competition from local restaurants. (News, Bloomberg, 2016)

There is a point that needs to be wondered. KFC has been accustomed to this business market, franchising market precisely, and currently has concentrated more on developing countries like Asian markets. However, franchising always goes along with both high expense and high risk. Take an example, it costs KFC over one million dollars for initial expenses of transferring its brand name; after that the firm still has to pay 500 USD per every month of fee for copyright and 5% of the total profit for marketing. KFC may have its capital refunded rapidly with its reputation and experiences of doing business most of the time, but the profit of the firm from the business market can still be affected by exterior factors.

16. Most business purchases are one of three types: new task purchase, modified rebuy purchase or straight rebuy purchase. Which buying situation will be most likely applicable to your product? Explain why.

Among three types of business purchase, Straight Re-buy purchase will be most appropriate for KFC. The reason for this is that this buying situation occurs when people in one market repurchase the same product frequently under roughly the same terms of sale (Dibb, Simkin, M.Pride, & Ferrell, 2012, p. 188); and KFC, as stated, has used to transfer its brand name abroad for years as well as cooperated with many local business men. With the popularity of the firm, franchising can be partly guaranteed, and the danger only experiences in investments and during the transaction, not because of the brand name. Besides the risk, franchising still bring about many profits and advantages for both KFC and the owner of the local restaurant.   

17. Describe the buying center and the buying process for your product in a selected business market of your choice.

·         The buying center: this group of individuals making decision in business includes users, influencers, buyers, deciders and gatekeepers. However, one or a group of people can perform some of these roles. (Dibb, Simkin, M.Pride, & Ferrell, 2012, p. 190) In the situation of KFC, users and gatekeepers are not appear in the business process.

Ø Influencers and deciders: in this case, the two roles are performed by both parties including KFC and people who are transferred to trade under the KFC brand name. They all have different impacts on the business process. For example, KFC can own the receipt of traditional dishes, those that make the name of the firm, but the other party also can add more dishes to diversify the menu and to adapt the final consumer’s taste; the price is as well one factor that can be bargained between two sides. The relationship of KFC and local transferees is bound by a millions dollar contract and several commercial interests.   

Ø Buyers: transferees can choose whether they should accept legal ties and being bound by interests to administrate a restaurant under the brand name of KFC.

·         The buying process:

Ø Stage 1: in this stage, KFC recognizes the need of expand its original market worldwide, and the firm then contacts to people who have manage ability in local area to open a new restaurant. This restaurant will be undersigned in the name of that person but still be bound by KFC. KFC owns the copyright and has the profit share periodically.

Ø Stage 2: during the second stage, KFC will look for information and advice about the new market. The demand is to widen the KFC restaurant system, so the firm may need to understand about the taste of local people, the acceptable price level that people here can afford and also the procedure as well as the cost of the franchising process.  

Ø Stage 3: with all those information, the firm start to look for a transferee in the local area who have the manage ability to trade the restaurant under its band name. This activity may be done through well-known agencies; the condition for a quality manager or owner can involve his profile of business knowledge, responsibility and the economic condition. If it goes favorable, the marketing team of KFC will come up with a list of potential transferees

Ø Stage 4 and 5: these two stages are the time when the firm evaluates and decides the right one that fits the product specifications developed in the second stage. (Dibb, Simkin, M.Pride, & Ferrell, 2012, p. 196) However, KFC tends to franchise its brand name to a number of transferees to increase profits after capital refund and reduce the disruption affected by quality problems, insignificant average profit or bankrupt.

Ø Stage 6: this stage is also called the re-checked stage, when KFC evaluates the performance of branches restaurants by comparing it with specifications and customer expectations. (Dibb, Simkin, M.Pride, & Ferrell, 2012, p. 197)

18. Describe the concept of derived demand, and give an example how this impacts the demand for your product in a business market.

·         “Derived demand is the demand for business products that arises from the demand for consumer products” (Dibb, Simkin, M.Pride, & Ferrell, 2012, p. 188). Basically, there will be two situations that can happen.

·         Firstly, there is an increase in demand coming from customers. This is when customers come to KFC more than often. The amount of food sold is higher. As a result, KFC will make more profit. This will encourage the desire to open for KFC food stalls, which will finally result in more copyright to be sold by KFC Company.

·         Secondly, when there is a decrease in demand. This situation tends to happen when there are more competitors coming to the market. Customers then will have many options to choose from. Thus, the demand for meals from KFC will decrease. That will have bad impact on their profit. There will be no desire for more KFC food stalls to be opened. Actually, the worst situation will be that food stall with lowest profit for a long time can be shut down. In conclusion, KFC Company will have no chance to sell their copyright.

Bibliography

Dibb, S., Simkin, L., M.Pride, W., & Ferrell, O. (2012). Marketing: Concepts and Strategies (6th ed.). China: Cengage Learning EMEA.

Lutz, A. (2015). KFC has one huge problem that's killing business. Retrieved September 28, 2016, from http://www.businessinsider.com/: http://www.businessinsider.com/kfc-sales-in-china-are-tanking-2015-7

News, Bloomberg. (2016, August 3). China Starts to Lose Its Taste for McDonald’s and KFC. Retrieved September 28, 2016, from http://www.bloomberg.com/: http://www.bloomberg.com/news/articles/2016-08-03/china-starts-to-loses-its-taste-for-mcdonald-s-and-kfc