Analysis of the Kfc Case Study

THE KFC CASE STUDY

1 Critically comment on the value creation that KFC encountered under PepsiCo as its corporate parent in the 1980s and early 1990s

1 Introduction

PepsiCo chose to acquire KFC because weaker chains in the chicken industry would eventually leave the market and KFC still had room to grow specifically in the North East and Mid-Atlantic regions. On KFC’s part, it is an international strategy wherein their global goals could materialise. The primary objective for KFC was to increase worldwide revenue and earnings by taking advantage of the potential growth in high-growth markets, to establish a strong position and to develop their image. These success factors are ever continuing cost savings through research and development, innovations and use of new technology to work efficiently.

2 Creating value

Segal-Horn (2004) confirmed that value creation only occurs in the following instances: the parent company sees an opportunity for a business to improve performance, the parent has the skills, resources and other characteristics needed to fulfil the required role and when the parent has sufficient understanding of the business and sufficient discipline to avoid value-destroying interventions. The acquisition of KFC by PepsiCo added value and importance to KFC in the following ways:

o As a result of the growing chicken segment industry, the US market slowly approached saturation which led to the loss of market share for KFC whilst other chicken chains increased sales at a faster rate. PepsiCo as a global company provided KFC with the opportunity (i.e. through their tangible, intangible and human resources) to extend their footprint beyond the US market and to increase their sales.

o During the 1980s and 1990s KFC’s struggles were predominantly as a result of their inability to bring new products to the market quickly and its innovation of new products. Competitors began to introduce...