Environmental Scanning and Business Strategy: A Case Study of Kentucky Fried Chicken (KFC)

This paper analyzes the link between environmental scanning and business strategy by performing an internal and external environmental scan for Kentucky Fried Chicken (KFC). It includes a SWOT analysis, internal and external risks, and recommendations for KFC to mitigate risks and sustain growth.

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Executive Summary
The paper has analyzed the link between environmental scanning and business strategy by
performing an internal and external environmental scan for Kentucky Fried Chicken (KFC). KFC
strengths have included good reputation, huge cash flows, expanded markets and developed brand equity.
Weaknesses of the organization included untrusted suppliers, health concerns and bad publicity images.
The opportunities included home delivery services, product differentiation and an increase in demand for
healthier food. The threats included rising competition from shops and supermarkets, government
regulations and health concerns like obesity in a young generation. Political, economic and natural
factors are external risks surrounding the company. Political risks included government policies and
regulations, political instability, high-interest rates, change in foreign exchange, imports and exports.
Economic factors included inflation rates, unemployment rates, recession and market boom. Natural
resources included disasters like fire, earthquakes, hurricanes and floods. The paper concluded that if
KFC needs to expand its growth and sustain the emerging competitive environment it must formulate
strategies to mitigate the risks.

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Table of Contents
Executive Summary....................................................................................................................................2
Introduction.................................................................................................................................................4
Company Background................................................................................................................................4
Stakeholders................................................................................................................................................5
Internal Stakeholders.................................................................................................................................5
External Stakeholders................................................................................................................................6
SWOT Analysis...........................................................................................................................................6
Strengths......................................................................................................................................................6
Weaknesses..................................................................................................................................................7
Opportunities...............................................................................................................................................7
Threats.........................................................................................................................................................7
Internal Risks..............................................................................................................................................8
External risks..............................................................................................................................................8
Political Factors...........................................................................................................................................8
Economic Factors........................................................................................................................................9
Natural Factors...........................................................................................................................................9
Conclusion.................................................................................................................................................10
References..................................................................................................................................................12

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Introduction
All companies are responsible for the Environment they create, with the organizations’ structure
and operations being directly affected by the created environments. The environment of an organization
has a great impact on the opportunities and resources. An organization’s primary objective is to take care
of its operations and the way they affect the environment. The successful development and growth of a
business are critical in the development of strategies which can assist in the operations of the business. In
understanding the scanning of a business environment, it is important to understand the operations of the
business and their effect on the business environment. Therefore, environmental scanning is a process of
dispensing, analyzing, and gathering business information for strategic and tactical purposes. The process
of environmental scanning entails acquiring both subjective and factual information on the environment
which the organization operates or considering venturing. The report will analyze the link between
environmental scanning and business strategy by performing an internal and external environmental scan
for Kentucky Fried Chicken (KFC).
Company Background
In 1952, Colonel Harland Sanders founded Kentucky Fried Chicken in the small front room of a
gas station in Corbin, Kentucky where he opened his first restaurant. Currently, KFC has become a
successful and renowned fast food restaurants in the world. In the United States alone, the organization
has operated more than 5200 restaurants and has more than 15000 active branches around the world.
More than twelve million customers are served by the outlets of KFC every day in the organization’s 109
territories and countries globally (Shoyemi, 2014). Currently, customers have been increasingly educated
on their daily food and are sensitive to the nutritional and healthy aspects of their diets which has greatly
impacted their food purchasing behavior and attitudes. The ethical behavior of the firm influences the
sale of their products, brand reputation and its overall image to customers.

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Stakeholders
Kentucky Fried Chicken has various stakeholders which can be grouped into both internal and
external stakeholders. The company’s internal stakeholders include employees and shareholders while
the external stakeholders include customers, suppliers, the government, financial institutions, and
competitors.
Internal Stakeholders
Employees are stakeholders who are important to KFC due to their overall provision of services
to the organization’s customers. Basically, employees are responsible for the activities of ensuring that
the customers are served with quality food on a timely basis which results in customer satisfaction and
loyalty. Therefore, without well-trained staff, the organization would not run smoothly. On the other
hand, the company’s responsibility is to ensure that its staff is well catered to be ensuring that they have a
secure job and a steady wage. Treating employees fairly ensures that they are happy, active and
enthusiastic towards work (Roberts-Lombard, 2009).
Shareholders are the people who own KFC as they have shares in the company. The interests of
shareholders are to ensure that the business runs smoothly with the intention of maximizing the revenue
of the company so as to maximize their wealth gained from the organization. When the organization
incurs losses, the shareholders are directly affected and, therefore, employees at Kentucky Fried chicken
are expected to protect the interest of the shareholders by diligently and effectively carrying out their
assigned duties and responsibilities in the organization.
External Stakeholders
According to Hussain (2014), customers are important to KFC since they are the reason why the
organization exists. Without customers, the company would not make a profit and would eventually go
bankrupt. Therefore, the interest of KFC’s customers is to visit the restaurant and get served with

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enjoyable fast food. Additionally, suppliers expand the services and products of the organization.
Delivery services ensure that KFC is well stocked through timely delivery of services and products.
Furthermore, the government sets policies which affect the operations of the organization including
taxes. Moreover, competitors offer similar and substitute products which give customers options of
where to buy their food which may, in turn, affect the company’s revenue. Consequently, financial
institutions fund the company in its operations and are responsible for the safe custody of the company’s
finances. Financial institutions also assist the company in audits to ascertain the financial position and
performance of the organization (DeHart, 2009).
SWOT Analysis
Strengths
For many years, KFC has had perfect factors for withstanding in the competitive business world.
The development of brand equity has enabled many customers globally to believe in their food.
Furthermore, in terms of sales, the company is the second largest fast food restaurant worldwide and
income is estimated to be 1 billion each year clearly indicating that the company has a strong cash flow
for effective operations and expansion (Dumanovsky, Huang, Bassett & Silver, 2010). The company
having many branches internationality like in the Middle East, Thailand, Korea, and China have
strengthened the company in terms of profit margins (Dubois & Asia, 2015). In addition, convenient and
menu variety has linked the company with a high rank and reputation. Other major strengths of KFC
include original spices and herbs recipe, a combination of Taco Bell and Pizza Hut and strong market
position in China.

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Weaknesses
The misleading information about KFC has been its key weakness to why the company failed to
be ranked in the top 20 growth in 2000. The company also possess several weaknesses including negative
publicity where the company has received criticized from PETA (Pendegrast, 2011). Untrustworthy
suppliers have also supplied contracted poultry damaging KFC reputation. Lack of strong market focus
and network, high employee turnover and believes by some social class of people that their food menu is
unhealthy and contains high calorie that is linked with obesity hence decreasing its popularity.
Opportunities
KFC has several opportunities within its business jurisdiction. Increase in healthier food demand
is a great opportunity. When there is an increase in demand for healthier food, KFC is in the position of
introducing a variety of healthy food choices in its menu. Home meal delivery is another opportunity the
company should fully exploit so that it can reach more customers as they can order the products through
online platforms. KFC also has an opportunity of expanding its products to its only chicken range due to
health issues to customers. The company should consider introducing new meals on its meals and offer
vegetarians, beef or pork meals that have a wide consumer segmentation and attracts customers from all
perspectives (Perez, Castro & Furnols, 2009).
Threats
Competition is the main threat facing the company. According to Burton, Howlett & Tangari
(2009), fast food restaurants have remained to be more competitive as an increase in wage rates has
directly affected the prices of the menu. Furthermore, the employee turnover for the fast food market is
estimated to be 85 percent. New competitors and supermarkets have further started offering the same
services as KFC. In addition, the small shops have improved quality of their food services and retained

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their customers while attracting new ones. The company is also threatened by International exchange
rates and health concerns, as people are caring about their health and stayed away from fried chicken.
Internal Risks
Internal risks at KFC include stability, which determines the ability of a business in managing its
finances, return capital to its investors and meeting its debt obligations which are an integral part for the
success of the organization. In addition, the unsuitable organizational structure can mitigate the success
of the organization. Therefore, an efficient and cohesive is maintained and established to effectively
carry out the aims and goals of KFC. Furthermore, internal company politics and mismanagement can be
debilitating to KFC by making the employees focus on what is happening internally rather than focusing
on the job and market. Moreover, lack of enough financial resources can make it difficult for KFC to
achieve its business goals. Innovation and incentives also pose a risk to KFC especially when they relate
to staff welfare, promotion, marketing, and product development. If KFC fails to allocate fair incentives
to its employees, risks may occur which affect the business operations (Achola, 2016).
External risks
External risk is defined as risks that occur due to economic events outs corporate structure and
they cannot be reduced (El-Sayegh, 2008). These risks are classified in terms of political, economic and
natural.
Political Factors
Political factors have affected KFC significantly, with government policies and regulations
interfering with fast food operation. Currently, the government is controlling fast food restaurants
because of health concerns such as obesity among young people, cholesterol issue and cardiovascular.
Furthermore, the government also controls licensing of KFC to open fast food joints and other business

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regulations like for a franchise. Other political factors include high-interest rates, unpredictable tariffs
and changes in exports and imports laws. Furthermore, violation of the factors may place the company in
risk of closure or heavy fines that may affect the profit margins. In the case of political instability, the
company also may be forced to close its operations. Furthermore, the company must establish good
relations with the government in giving mutual benefits like tax and employment in order to succeed in
foreign markets hence incurring huge costs.
Economic Factors
Economic recession, high inflation, and market boom have been linked with change in the way
KFC operates presently and plans for the future. Furthermore, these economic factors are difficult to
access and control and therefore their impacts on business are very high. High foreign exchange rates,
unemployment rates and global economy states interfere with KFC’s ability to maintain profit levels and
gain the components it requires. For example, if KFC has business expansions to the UK where the
economy is high at 3.3 percent (Smith, Keogh-Brown, Barnett & Tait, 2009), the company might close
down because of a decrease in customer footfall.
Natural Factors
Natural factors that risk KFC in its normal operation include natural disasters like floods,
earthquakes and hurricanes. For example, the occurrence of an earthquake can affect KFC ability to open
its business for a number of weeks that can lead to a massive decline in sales on that period. Generally,
natural disasters may damage the building and products being sold by the company.
Summary of KFC Risk Analysis Table
Risk
category
Risk type
(Human, physical,
Stakeholders
affected
Likelihood
rating
Consequences
rating
Risk control
methods

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environmental,
financial etc.)
(A,B,C,D,E) (1,2,3,4,5) (elimination,
substitution,
engineering,
administration,
process/ equipment)
External economical Internal
stakeholders
A- high 4-higher administration
External political Internal and
external
stakeholders
C-medium 3-medium administration
External natural Internal and
external
stakeholders
E-low 5-
catastrophic
engineering
Conclusion
KFC‘s strengths have enabled the company to maneuver in the competitive hospitality industry.
The high market shares and huge cash flow provides a good opportunity for the company to expand its
operation to other countries. The competition from small shops and supermarkets are main threats for
KFC to sustain in the competitive environment. The complex process of the company gaining a license to
expand its operations and changing in foreign exchanges puts the company in closure risks. High

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inflation rates, GDP and unemployment’s are macro-economies factors that risk the revenues generated
by the company. Furthermore, natural risks like earthquakes that have low likelihood occurrence but
catastrophic impact puts the business operation in uncertainty risks.

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References
ACHOLA, M. A. (2016). Franchising as a Market Entry Strategy by Kentucky Fried Chicken into
Kenya. Unpublished MBA Thesis, University of Nairobi.
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Quick Service Restaurant Menu Items Influence Consumers’ Product Evaluations, Purchase
Intentions, and Choices?. Journal Of Retailing, 85(3), 258-273. doi: 10.1016/j.jretai.2009.04.007
DeHart, M. (2009). Fried chicken or pop? Redefining development and ethnicity in Totonicapán.
Bulletin of Latin American Research, 28(1), 63-82.
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Outbound Tourism Market (Bachelor's thesis).
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Calorie Information in New York City After Implementation of a Menu Labeling Regulation.
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Pendegrast, N. (2011). Veganism, organizational considerations, and animal advocacy campaigns. In
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Perez, C., de Castro, R., & Font I Furnols, M. (2009). The pork industry: a supply chain perspective.
British Food Journal, 111(3), 257-274. doi.org/10.1108/00070700910941462

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