Sunday, December 21, 2008

Porter's Competitive Forces Model

KFC is one of the famous fast foods that has been developing since 1952 and had been first introduced by Colonel Harland Sanders. In Malaysia, the first KFC restaurant was opened in 1973 at Jalan Tunku Abdul Rahman. And in this essay, the KFC restaurants that I want to focus is only the restaurants in Malaysia.

From the Porter’s Competitive Model, we can see that:

1) The threat of new competitors

The first KFC restaurant was opened in 1973 at Jalan Tunku Abdul Rahman. Today there are more than 390 KFC Restaurants nationwide and still counting. Mc Donald’s can be considered as a new threat for KFC. Since the first Mc Donald’s restaurant has been opened in 1982 at Jalan Bukit Bintang, Kuala Lumpur, Mc Donald’s has been one of the biggest KFC’s rival in Malaysia. Mc Donald’s does not only sell burgers but Mc Donald’s also has been developing “Ayam Goreng McD “ to compete with KFC’s fried chicken. In fact these days, Mc Donald's has far more developed than KFC. We can see that through the products that Mc Donald's has produced compared to KFC. Recently Mc Donald's has created more products. Creatively, they do create new ones and in the mean times they maintain and improve their current products. And Mc Donald's use the current popular movies and give free toys based on the characters of the movie and people can get that when they buy the "Happy Meal". KFC too, do gives toys. But somehow they don't connect the toys with the most current popular movie on the cinema. And they updated the new toys less frequently compared to Mc Donald's. This sum up that Mc Donald's is the new competitors for KFC.

2) The bargaining power of supplier

After some research through the internet, I found out that KFC was having some issues with their raw chicken supplier in somewhere around 2004. The supplier had done something horrible while slaughtering the chickens and forcing KFC to terminate the supplying from the accused supplier and find another supplier for raw chickens. This shows that the bargaining power for KFC is high since they can get another supplier than the supplier that they used to have business with. In some research that I've done too, I found out that KFC used to be under And they have some kind of contracts in order for KFC to not to have any business with other carbonated drinks company such as coca-cola and so on. And in the mean time too, Pepsi do supplies products to KFC's main competitors. All of this is lowing down KFC's bargaining power of supplier.

3) The bargaining power of customers (buyers)

The bargaining power of customers is high considering that they have lots of choices to be made. As mentioned above, the existent of other fast food restaurants do increase the bargaining power of customers. Customers can go to any fast foods restaurant that offered more affordable prices especially for students like us. As I have mentioned above, Mc Donald's has been developing products such as "Ayam Goreng McD" to compete with KFC. Some of us might think that KFC's chicken is far more good compared to Mc D's but some might not. And KFC to has been developing products that can compete with Mc D's product. This shows how healthy the competition between these companies are going on and how it will increase the bargaining power of customers.

4) The threat of substitute products and services

As we all already know, the main product for KFC is obviously the fried chicken. Fried chicken is the earliest recipes that been developed in 1930 by Colonel Harland Sanders. And recently in Malaysia, new products have been developed rapidly by the KFC owner in Malaysia. In example, the Kentucky Nuggets is the substitute product developed by KFC Malaysia and can be considered as the substitute product that has been a threat to the fried chicken.

5) The rivalry among existing firms in the industry

A&W is the first fast food from the United States that has set foots in Malaysia. Though A&W is not a famous fast food in Malaysia, it also can be considered as one of KFC biggest existing rival in Malaysia. The very first A&W is opened in Batu Road, Kuala Lumpur which is now known as Jalan Tunku Abdul Rahman. KFC and A&W has been competing since the opening of KFC first outlet in Malaysia and has as the consequences of that, A&W had a declining business era from 1997-2000.

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