Kentucky fried chicken, a renowned American chain of fast food restaurant; commonly known by the masses, as KFC. It's headquarter is located in Louisville. KFC is the subsidiary of yum! Brands, which owns Pizza hut and Taco bell chains of fast food restaurants as well. It has 20,000 franchises in 123 countries, which makes it, second largest chain of fast food restaurant in the world, following McDonalds. This imminent fast food restaurant was founded by, Harland sander; in 1936.
BCG matrix of KFC
BCG matrix is the representation of company different divisions, on a four quadrant graph. Category of segments dimension can be identified with the help of market share and industrial growth rate. It helps the companies to identify the suitable strategies for the segments. Each profit center requires distinct strategies from other, according to the financial standing of segment. Companies can identify that, where the company's each segment stands and which strategy should be adopted for each? With the help of four dimensional BCG matrix. Following are the four dimensions of BCG matrix, Question mark, Cash cows, Dogs and Stars. We will focus on, KFC four profit centers which are as follow; franchising and licensing, KFC china, KFC India and KFC USA.
Question Mark
The Boston Consulting Group (BCG) matrix was used to classify coconut export market into four groups, namely stars, cash cows, question marks and dogs. Professor Malcolm McDonald has been. The need for strategy in order to expand its existing product in very promising markets for McDonald's is very essential. McDonald's along with KFC and other major fast food chains have dominated the American continent as well as elsewhere. BCG Matrix: The market growth rate measures industry attractiveness.
Question mark are those segments, which market share is low and competing in high growth industry. KFC India comes into the category of Question Mark, India market has huge potential it is one of the most populated countries in the word. Unfortunately its sales are declining every year, KFC India should use the product development strategy like McDonald adopted in India.
Stars
Those segment which have high market share in high industry sales growth rate, comes in to the category of stars. KFC china fall in to the category of stars with high market share in high industry sales growth rate. For such segments, market development, product development and market penetration strategies should be formulated and executed. KFC China market development strategy is very aggressive, is exploring new market segments and establishing 1 restaurant on average every day. In 2015; 743 restaurants were opened in China, and planned to open 600 more in 2016. It has also used the strategy of product development by offering traditional food items in menu. KFC china offer 50 food item to their costumer which are twice, compare to US menu.
Cash Cows
Cash cows are those segments which have high market share in low industry growth rate. KFC franchising and licensing comes into the grouping of cash cows segment. Franchising and licensing have generated 16 billion of revenue in 2015. Total system growth rate was 11%, however, Russia system growth rate was impressive in 2015, it has generated 40 % system growth rate. Such segment should formulate and execute divestiture strategy, which KFC is currently executing, in US chains of KFC restaurants.
Dogs
Segments which have low market share in low industry growth rate. KFC target audience in US are African American people and its menu contains only 26 food items and emphasis on low price and take out. Such segment should use divesture strategy, which KFC US has already executed and have mostly franchised and licensed KFC US.
Yum! Brands reports 6% Y-o-Y decline in sales of Pizza Hut; KFC drops 1%. Retrieved from.
References
Financial Highlights. Retrieved from.
KFC radical approach to the China. Retrieved from.
https://hbr.org/2011/11/kfcs-radical-approach-to-china
Annual report of Yum Brands. Retrieved from.
http://www.yum.com/annualreport/pdf/2015YumBrands_AnnualReport.pdf
BCG Matrix
The BCG matrix is a strategic management tool that was created by the Boston Consulting Group, which helps in analysing the position of a strategic business unit and the potential it has to offer. The matrix consists of 4 classifications that are based on two dimensions. These first of these dimensions is the industry or market growth. The other of these dimensions is the relative market share of the strategic business unit. Strategic business units are placed in one of these 4 classifications. The BCG matrix for McDonalds will help decide on the strategies that can be implemented for its strategic business units.
Strategic business units with high market growth rate and high relative market share are called stars. Businesses should invest in their stars and can implement vertical integration, market penetration, product development, market development, and horizontal integration strategies. Strategic business units with high market growth rate and low relative market share are called question marks. These strategic business units require close considerations whether the business should continue with them or divest. Strategic business units with low market growth rate but with high relative market share are called cash cows. The business should invest in these to maintain their relative market share. Lastly, the strategic business units with low market growth rate and low relative market share are called dogs. The business should divest these strategic business units.
BCG Matrix of McDonalds
The BCG Matrix for McDonalds will help McDonalds in implementing the business level strategies for its business units. The analysis will first identify where the strategic business units of McDonalds fall within the BCG Matrix for McDonalds.
Stars
- The financial services strategic business unit is a star in the BCG matrix of McDonalds. It operates in a market that shows potential in the future. McDonalds earns a significant amount of its income from this SBU. McDonalds should vertically integrate by acquiring other firms in the supply chain. This will help it in earning more profits as this Strategic business unit has potential.
- The Number 1 brand Strategic business unit is a star in the BCG matrix of McDonalds, and this is also the product that generates the greatest sales amongst its product portfolio. The potential within this market is also high as consumers are demanding this and similar types of products. McDonalds should undergo a product development strategy for this SBU, where it develops innovative features on this product through research and development. This will help McDonalds by attracting more customers and increases its sales.
- The Number 2 brand Strategic business unit is a star in the BCG matrix of McDonalds as McDonalds has a 20% market share in this category. It also the market leader in this category. The overall category is expected to grow at 5% in the next 5 years, which shows that the market growth rate is expected to remain high. McDonalds should use its current products to penetrate the market. This could be done by improving its distributions that will help in reaching out to untapped areas. This will help increase the sales of McDonalds.
Cash Cows
- The supplier management service strategic business unit is a cash cow in the BCG matrix of McDonalds. This has been in operation for over decades and has earned McDonalds a significant amount in revenue. The market share for McDonalds is high, but the overall market is declining as companies manage their supplier themselves rather than outsourcing it. The recommended strategy for McDonalds is to stop further investment in this business and keep operating this strategic business unit as long as its profitable.
- The Number 3 brand strategic business unit is a cash cow in the BCG matrix of McDonalds. This is an innovative product that has a market share of 25% in its category. McDonalds is also the market leader in this category. The overall category has been declining slowly in the past few years. McDonalds has the power to influence the market as well in this category. It should, therefore, invest in research and development so that the brand could be innovated. This will help the category grow and will turn this cash cow into a star. The overall benefit would be an increase in sales of McDonalds.
- The international food strategic business unit is a cash cow in the BCG matrix for McDonalds. This business unit has a high market share of 30% within its category, but people are now inclined less towards international food. This change in trends has led to a decline in the growth rate of the market. The recommended strategy for McDonalds is to invest enough to keep this strategic business unit under operations. If it no longer remains profitable and turns into a dog, then McDonalds should divest this strategic business unit.
Question Marks
- The local foods strategic business unit is a question mark in the BCG matrix for McDonalds. The recent trends within the market show that consumers are focusing more towards local foods. Therefore, this market is showing a high market growth rate. However, McDonalds has a low market share in this segment. The recommended strategy for McDonalds is to invest in research and development to come up with innovative features. This product development strategy will ensure that this strategic business unit turns into a cash cow and brings profits for the company in the future.
- The Number 4 brand strategic business unit is a question mark in the BCG matrix for McDonalds. This strategic business unit is a part of a market that is rapidly growing. However, this strategic business unit has been incurring losses in the past few years. It has also failed in the attempts made at innovation by research and development teams. The recommended strategy for McDonalds is to divest and prevent any future losses from occurring.
- The confectionery strategic business unit is a question mark in the BCG matrix for McDonalds. The confectionery market is an attractive market that is growing over the years. However, McDonalds has a low market share in this attractive market. The low sales are as a result of low reach and poor distribution of McDonalds in this segment. The recommended strategy for McDonalds is to undergo market penetration, where it pushes to make its product present on more outlets. This will ensure increased sales for McDonalds and convert this strategic business unit into a cash cow.
Dogs
- The plastic bags strategic business unit is a dog in the BCG matrix of McDonalds. This strategic business unit has been in the loss for the last 5 years. It also operates in a market that is declining due to greater environmental concerns. The recommended strategy for McDonalds is to divest this strategic business unit and minimise its losses.
- The Number 5 brand strategic business unit is a dog in the BCG matrix for McDonalds. This is operating in a market segment that is declining in the past 5 years. The company also has negative profits for this strategic business unit. However, it is expected that the market will grow in the future with environmental changes that are occurring. The recommended strategy for McDonalds is to invest in the business enough to convert into a cash cow. This will ensure profits for McDonalds if the market starts growing again in the future.
- The synthetic fibre products strategic business unit is a dog in the BCG matrix of McDonalds. The market for such products has been declining, and as a result of this decline, McDonalds has been facing a loss in the past 3 years. The market share for it is also less than 5%. The recommended strategy for McDonalds is to divest this strategic business unit to minimise any further losses.
- The artificially flavoured products strategic business unit is a dog in the BCG matrix for McDonalds. These products were launched recently, with the prediction that this segment would grow. However, with increasing health consciousness, people are now refraining from consumption of artificial flavours. The market is shrinking, and McDonalds has no significant market share. The recommended strategy for McDonalds is to call back this product.
Some of the strategic business units identified in the BCG matrix for McDonalds have the potential of changing from their current classification. For example, a dog changing to a cash cow. These have been identified in the BCG matrix of McDonalds and recommended strategies to ensure such change have also been made.
VRIO Framework
The VRIO Framework or VRIO analysis is a strategic management tool that is used to analyse a firm's internal strengths and resources. It helps identify which one of its internal strengths and resources can be a source of sustained competitive advantage. The analysis is based on the idea that a firm's internal resources are a source of sustained competitive advantage if they are valuable, rare, cannot be imitated by competition, and are organised to capture value for the organisation. The VRIO analysis requires looking at a firm's resources based on these 4 factors.
Based on the analysis, each resource can either provide a sustained competitive advantage, has a good competitive advantage, temporary competitive advantage, competitive parity or competitive disadvantage. A sustained competitive advantage exists when a resource is valuable, rare, non-imitable and organised. A good competitive advantage occurs if it is valuable, rare, and non-imitable. A temporary competitive advantage exists if it is valuable and rare. A competitive parity occurs if it is only valuable. Lastly, the resource is a competitive disadvantage if it is neither of the 4. The analysis takes place in this order by first assessing whether a resource is valuable, rare, imitable and organised.
References
Mcdonald's Bcg Matrix Test
- The local foods strategic business unit is a question mark in the BCG matrix for McDonalds. The recent trends within the market show that consumers are focusing more towards local foods. Therefore, this market is showing a high market growth rate. However, McDonalds has a low market share in this segment. The recommended strategy for McDonalds is to invest in research and development to come up with innovative features. This product development strategy will ensure that this strategic business unit turns into a cash cow and brings profits for the company in the future.
- The Number 4 brand strategic business unit is a question mark in the BCG matrix for McDonalds. This strategic business unit is a part of a market that is rapidly growing. However, this strategic business unit has been incurring losses in the past few years. It has also failed in the attempts made at innovation by research and development teams. The recommended strategy for McDonalds is to divest and prevent any future losses from occurring.
- The confectionery strategic business unit is a question mark in the BCG matrix for McDonalds. The confectionery market is an attractive market that is growing over the years. However, McDonalds has a low market share in this attractive market. The low sales are as a result of low reach and poor distribution of McDonalds in this segment. The recommended strategy for McDonalds is to undergo market penetration, where it pushes to make its product present on more outlets. This will ensure increased sales for McDonalds and convert this strategic business unit into a cash cow.
Dogs
- The plastic bags strategic business unit is a dog in the BCG matrix of McDonalds. This strategic business unit has been in the loss for the last 5 years. It also operates in a market that is declining due to greater environmental concerns. The recommended strategy for McDonalds is to divest this strategic business unit and minimise its losses.
- The Number 5 brand strategic business unit is a dog in the BCG matrix for McDonalds. This is operating in a market segment that is declining in the past 5 years. The company also has negative profits for this strategic business unit. However, it is expected that the market will grow in the future with environmental changes that are occurring. The recommended strategy for McDonalds is to invest in the business enough to convert into a cash cow. This will ensure profits for McDonalds if the market starts growing again in the future.
- The synthetic fibre products strategic business unit is a dog in the BCG matrix of McDonalds. The market for such products has been declining, and as a result of this decline, McDonalds has been facing a loss in the past 3 years. The market share for it is also less than 5%. The recommended strategy for McDonalds is to divest this strategic business unit to minimise any further losses.
- The artificially flavoured products strategic business unit is a dog in the BCG matrix for McDonalds. These products were launched recently, with the prediction that this segment would grow. However, with increasing health consciousness, people are now refraining from consumption of artificial flavours. The market is shrinking, and McDonalds has no significant market share. The recommended strategy for McDonalds is to call back this product.
Some of the strategic business units identified in the BCG matrix for McDonalds have the potential of changing from their current classification. For example, a dog changing to a cash cow. These have been identified in the BCG matrix of McDonalds and recommended strategies to ensure such change have also been made.
VRIO Framework
The VRIO Framework or VRIO analysis is a strategic management tool that is used to analyse a firm's internal strengths and resources. It helps identify which one of its internal strengths and resources can be a source of sustained competitive advantage. The analysis is based on the idea that a firm's internal resources are a source of sustained competitive advantage if they are valuable, rare, cannot be imitated by competition, and are organised to capture value for the organisation. The VRIO analysis requires looking at a firm's resources based on these 4 factors.
Based on the analysis, each resource can either provide a sustained competitive advantage, has a good competitive advantage, temporary competitive advantage, competitive parity or competitive disadvantage. A sustained competitive advantage exists when a resource is valuable, rare, non-imitable and organised. A good competitive advantage occurs if it is valuable, rare, and non-imitable. A temporary competitive advantage exists if it is valuable and rare. A competitive parity occurs if it is only valuable. Lastly, the resource is a competitive disadvantage if it is neither of the 4. The analysis takes place in this order by first assessing whether a resource is valuable, rare, imitable and organised.
References
Mcdonald's Bcg Matrix Test
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of management, 17(1), 99-120.
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Cardeal, N., & Antonio, N. S. (2012). Valuable, rare, inimitable resources and organization (VRIO) resources or valuable, rare, inimitable resources (VRI) capabilities: What leads to competitive advantage?
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Mcdonald's Bcg Matrix Login
Jurevicius, O. (2013b). BCG growth-share matrix. Retrieved from https://www.strategicmanagementinsight.com/tools/bcg-matrix-growth-share.html
Knott, P. J. (2015). Does VRIO help managers evaluate a firm's resources? Management Decision, 53(8), 1806-1822.
Mcdonald's Bcg Matrix Chart
Seeger, J. A. (1984). Research note and communication. Reversing the images of BCG's growth/share matrix. Strategic Management Journal, 5(1), 93-97.
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