KFC's Entrepreneurial Innovation and Business Canvas Analysis Report

This report provides a comprehensive analysis of KFC's entrepreneurial innovation and business strategies. It begins with an introduction to innovation and its importance in modern organizations, followed by an overview of KFC, its history, and current market position. The report then delves into an analysis of KFC's current situation, including sales performance, production budgets, and a Porter's five forces analysis to assess its competitive environment. A key component of the report is the examination of KFC's business model canvas, highlighting its key partnerships, revenue streams, and customer segments. The concept of innovation is explored, including an overview of disruptive innovation and its application within KFC. The report recommends strategies for KFC to improve its market share, particularly in the American market. The report concludes with a discussion on how KFC can leverage innovation to gain a competitive advantage, drawing upon relevant academic literature and industry insights.

Running head: ENTREPRENEURIAL & INNOVATION
Entrepreneurial & Innovation
Name of Student
Name of University
Author Note

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Table of contents
Introduction................................................................................................................................2
About the organisation...............................................................................................................2
Analysis of current situation of the organisation.......................................................................2
Analysis of the business canvas.................................................................................................5
Concept of innovation................................................................................................................6
Innovation change model...........................................................................................................7
Application of innovation in the organisation............................................................................8
Recommendation......................................................................................................................10
Conclusion................................................................................................................................12
Reference..................................................................................................................................13

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Introduction
Innovation is one of the modern day concepts that most organisations tend to
implement in order to get an advantage. According to Drucker (2014), innovation requires a
high skill-set and an individual involved in the innovation of products or tactics need to be
creative. It provides a sense of uniqueness to the products and the strategies that are
employed by an organisation. The assignment talks about the application of innovation and
change model in an organisation. The effectiveness of the concept is discussed and the
manner in which organisations can use it to gain a competitive advantage is discussed in the
assignment. For the purpose of the discussion, the assignment focuses on KFC and the
innovative strategies implemented by the organisation.
About the organisation
KFC is an American fast food restaurant chain specialising in fried chicken. It is one
of the most popular restaurant chains in the world and is second only to McDonald's in terms
of earning revenue. It is a subsidiary company of Yum Brands but has over 20,000 locations
in almost over 123 countries across the world (Kfc.com 2018). Colonel Harland Sanders
started the company as a roadside business in 1930. It became popular among the local
people, and Colonel Sanders soon developed the concept of franchising and the first franchise
of the company was set up in 1952. Since then the company have grown steadily and have
been the central point of attraction, particularly for the young people. Currently, the revenue
of the company is about $US23 million.
Analysis of current situation of the organisation
Reports suggest that currently, the sale of the fried chicken in America have taken a
considerable drop. However, in 2016, after the company brought back the recipe used by

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Colonel Sanders the sales have considerably increased. As observed by Johnston and
Marshall (2016) KFC lost about 1,200 restaurants in the last 14 years in the US. In 2002, the
number of restaurants in the US was 5472, however, in 2016 the number dropped to 4270.
This is mainly due to the rumours that the restaurant serves chicken using steroids. This led to
a huge loss in the US market, and its rival company, Chick-fil-A became the number one
restaurant chain in the country.
Figure 1: KFC sales figure in the USA (2006-2016)
(Source: Kfc.com 2018)
However, the company have done better in countries outside the US. Reports have
shown that the number of restaurants has increased rapidly over the last six years. In 2010,
the number of restaurants was about 16,853; however, the number increased to 20,604 in
2016.

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Figure 2: KFC sales figure worldwide (2010-2016)
(Source: Kfc.com 2018)
Production and sales budget
Units in opening
inventory
Units produced Units
sold
Units in ending
inventory
February 5 10 10 5
March 5 11 10 6
April 6 12 10 8
May 8 13 10 11
June 11 15 20 6
July 6 16 10 12
August 12 18 20 10
September 10 19 15 14
October 14 21 20 16
November 16 24 20 19
December 19 26 30 15
January 15 10 30 (5)
12-month period 5 195 205 (5)
Figure 3: Sales projection of KFC
(Source: Created by author)

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Based on the number of units sold by the company, it can be said that the sales
projection of KFC is continuously on the rise. From February to May, the company manages
to sell its product at a steady rate at 10 units. However, the sales increased on the month of
June by 10 more units before dropping down in the months that followed. From October to
January the sale of the items in KFC had grown at a steady rate and it is seen that on an
average, KFC sales about 205 units of its product. This indicates a surplus amount of goods
sold as the company only produces 195 units to cover a year. This indicates high rate of profit
for the company.
Having analysed the sales performance of KFC, Porter’s five-force analysis can be
conducted that highlights the resources and capabilities of the restaurant.
Bargaining power of suppliers- For KFC the suppliers of the company is more hence;
this has posses a low threat.
Bargaining power of buyers- KFC is one of the biggest chicken selling restaurants in
the world. Hence, the bargaining power of the buyers are pose less threat to the company as
people visit it to get good quality food.
Threat of substitutes- The threat of substitutes mainly comes from the fact that the
company sells burgers that are not as popular as the ones sold in Burger King or McDonald’s.
Hence, this proves to be a high threat for the company.
Threat of new entrants- KFC has already established itself in the global market.
Hence, this particular threat proves to be low for the company, as the new restaurants cannot
match the standards of KFC.

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Industry rivalry- The industry rivalry mainly arises from McDonald’s and Burger
King that have already gained international recognition. Hence this proves to a high threat for
KFC.
Figure 3: Porter’s five forces
(Source: Created by author)
Analysis of the business canvas
According to Joyce and Paquin (2016), business model canvas helps to analyse the
products, value proposition, customers and revenue streams and so on of an organisation. It is
considered as a strategic management technique that can be used by start-up firms as well as
existing organisation to analyse its situation and make improvements. In the case of KFC, the
business canvas model portrays the elements that define the success of the business. The
analysis of the canvas model shows that KFC collaborates with Pepsi, Coca-Cola and Nestle
for enhancing its sales of products. This is evidenced by the fact that recently the restaurant

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provides meal combos that involve a soft drink as well as a cookie manufactured by these
partners.
This provides KFC with an added advantage of gaining its revenue. Euchner (2016)
stated that the franchising of the restaurant is one of the key strengths as it is the main source
of revenue streaming. The fact that it provides fast delivery of online orders via a website is
another strategic master plan adopted by the restaurant. The fact that the company targets
customers of all segments including children is a huge strategic step for improvement of the
restaurant. However, with variable sources of revenue, it is important that the restaurant adopt
certain changes for improving the condition of the market in the US.
Figure 4: Business model canvas of KFC
(Source: Created by author)

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Concept of innovation
According to Cantamessa and Montagna (2016), innovation can be considered as new
ideas, devices and methods that can be used by organisations to gain an advantage in the
market. However, Sapra, Subramanian and Subramanian (2014) view innovation as a method
of applying better and unique solutions that meet the requirements of an organisation. An
organisation can be innovative by manufacturing products that are more effective, processes,
services as well as technologies. The idea related to an innovation of products involves the
application of original and fresh ideas.
These ideas need to be supported by the managers and leaders so that the employees
gain the confidence of showing an applying their creativity. However, it is to be noted that
the term is confused with the invention (Chesbrough, Vanhaverbeke and West 2014). This is
mainly because an invention is the creation of products for the first time. Innovation, on the
other hand, involves applying changes and new ideas to products and services that already
exist in the market. Nicholls et al. (2015) stated that innovation could act as a catalyst for the
growth of an organisation. Products sold in the market need to be unique in a manner that
attracts the customers into purchasing those products.

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Figure 5: Innovation
(Source: Created by author)
Innovation change model
According to Christensen, Raynor and McDonald (2016), disruptive innovation can
be considered as a form of innovation that creates new market and value for an organisation.
Such a strategy results in the disruption of the old market, and the new technologies or ideas
that have been developed are taken into consideration by an organisation. The concept of
disruptive innovation has been termed as the most influential business idea of the 21st
century. However, Quitzow et al. (2014) countered this by stating that the not all the ideas
about innovation are disruptive. Most of the plans are revolutionary in nature, however;
disruptive nature exists only in terms of changing the face of the market with new and unique
ideas.
In this regard, an example of disruptive change model can be taken into consideration.
The very first automobile that was manufactured was not considered as a disruptive

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innovation. This is mainly because of the fact that automobiles existed in the early days in
terms of horse-drawn carriages. Thus, the mere introduction of a four-wheel vehicle that runs
on an engine is a simple innovative process that was introduced in the market. However, once
the vehicles were started to be produced at a mass rate, the innovation was called disruptive
innovation. This is because it brought the new ideas and marketing strategies in focus and
slowly wiped out the old market in which horses were used as vehicles. The transportation
market changed drastically in the 1900s with the introduction of such marketing scheme.
Figure 6: Disruptive change model
(Source: Created by author)
People outside of a company along with the entrepreneurs bring about disruptive
innovation. The existing market-leading companies do not undertake initiatives to bring about
disruptive change in the market. Some of the reasons behind the rejection of disruptive
innovation are the fact that these changes do not bring about profits at the beginning
(Christensen, Raynor and McDonald 2015). The development of a disruptive change involves

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the intake of scarce resources as a huge mass of production need to be done to enforce the
changes in the market. Apart from this, a disruptive process takes a long time to develop. A
test subject needs to be launched in the market and based on its success, mass production can
be maintained. Moreover, as observed by Shigabieva et al. (2014), the risk associated with
the application of disruptive innovation is also high.
Hence, it can be said that such a strategy can be used after a considerable analysis of
the strengths and weakness of an organisation. This is mainly because of the fact that
disruptive innovation is a force and not a tool. Managers cannot predict the success they may
have from the application of this method (Goffin and Mitchell 2016). The method generally
exploits the failure rate of large companies rather than the success of smaller companies.
However, for a restaurant chain like KFC, the disruptive innovation can bring out
considerable improvement. This is mainly because, over the last few years, KFC has failed to
create a significant impact in the American market.
Application of innovation in the organisation
Having analysed the innovation concept one can say that KFC can apply innovation to
improve its number of restaurants in the American market. According to Westland (2016), it
is important for managers to introduce employees to the concept of innovation and the
benefits that can be reaped from being creative. Without the support of the employees, it can
be difficult for an organisation to implement changes and be innovative in a challenging
environment (West and Bogers 2017). Innovation is a type of change that is undergone in an
organisation. It has been evidenced that employees do not like changes as it disrupts the flow
of work. Hence, it is necessary to ensure that the innovation tactics applied in an organisation
are done taking into consideration the interests of the employees.