Impact of Regionalization on Proposed KFC Business in Australia

This report analyzes the impact of regionalization on the proposed expansion of KFC franchise outlets, particularly focusing on the Australian market and its potential within the Trans-Pacific Partnership Agreement (TPP). The study begins by defining key terms like regionalization, customs unions, common markets, and economic and monetary unions, explaining their relevance to KFC's expansion strategy. It explores both internal and external contextual factors, utilizing a SWOT analysis to identify strengths, weaknesses, opportunities, and threats. The external factors considered include political, economic, social, technological, environmental, and legal aspects. The report offers business recommendations, emphasizing adherence to KFC's guidelines and addressing consumer health concerns. The conclusion highlights the benefits of regionalization for KFC, while also stressing the importance of maintaining brand standards and adapting to local market conditions. The report references various academic sources to support its analysis.

Running head: IMPACT OF REGIONALIZATION ON PROPOSED BUSINESS
Assessment 1 (Part B): Applying Contextual Factors
[Impact of Regionalization on Proposed Business]
Name of the student:
Nam of the university:
Author note:

1IMPACT OF REGIONALIZATION ON PROPOSED BUSINESS
Executive summary
This study is aimed at understanding the impact of regionalization on business. The purpose is
being served through the assumptions made on the future expansion of the proposed KFC outlets
in Australia and other member nation of “The Trans-Pacific Partnership Agreement (TPP)”. The
assignment also presents, in brief, the probable impact of various internal and external contextual
factors on the business.

2IMPACT OF REGIONALIZATION ON PROPOSED BUSINESS
Table of Contents
Introduction:....................................................................................................................................3
Defining the key terms and utilizing the theories & concepts presented in the chosen topic which
is "Topic 6: Regional Economic Issues”:........................................................................................3
Explaining major internal and external contextual factors and how they affect business structures
and strategy:.....................................................................................................................................6
Providing well justified and feasible business recommendations based on the analysis conducted:
.........................................................................................................................................................8
Conclusion:......................................................................................................................................9
References:....................................................................................................................................10

3IMPACT OF REGIONALIZATION ON PROPOSED BUSINESS
Introduction:
The proposed KFC franchise outlet, which will be opening in an approximate five
branches in the Melbourne city, is also aimed at expanding to a much wider market. However,
the expansion depends on how it performs in the first year of its launch. The expansion will
definitely need significant investment (Serra & Kunc, 2015). A business expansion can be
through various contextual factors like Globalization, Cross-Cultural Management, and Regional
Economic Issues. It solely depends on the management of what they feel as the best suitable
strategy for expansion. They may consider different parameters like the capital flow, the
opportunities in the target market and the probable challenges (Beckert, 2013). For the expansion
of proposed KFC franchise outlet, Regionalization has been chosen as the strategy to target the
market that is close to Australia geographically or have more or less the same trade policies
(Steinert et al., 2015). The study is aimed at analyzing the impact of regionalization on the
business expansion of the proposed KFC outlet.
Defining the key terms and utilizing the theories & concepts presented in the chosen topic
which is "Topic 6: Regional Economic Issues”:
Regionalization facilitates a trade relationship with the nations that are close to existing
country and have similar trade policies. They adapt the regionalization strategy to utilize the
similarities, which is among the different nations. They also do it for reducing the business risk,
which is much higher in doing business with countries that are geographically placed at a much
higher distance (Li, Goodchild & Church, 2013). Regionalization can be understood as one of
the key finds of the later quarter of 20th century. The 21st century has seen growths in Regional
Trade Agreements (RTA) and Regional Economic Integration (REI) (Lapadre & Tajoli, 2014).

4IMPACT OF REGIONALIZATION ON PROPOSED BUSINESS
The strategy will have several benefits for KFC franchise for various factors that also
include the customs union. The Customs Union enables a full integration of economic and
political factors (Helbich et al., 2013). The integration will reduce the economic and political
barriers that are potential threats to business in foreign countries. Doing business in China will be
full of uncertainties than doing it in New Zealand, which is close to Australia and shares more or
less the same trade policies (Gleeson, Lopert & Reid, 2013).
The Common Market concept is another opportunity, which the KFC franchise chain
will get on considering the regionalization strategy. The common market concept means that
there are no trade barriers within the different state of the member countries. There will be
freedom to move to any member nation without fulfilling any strict formalities like immigration,
cross-border capital flow between the member countries and emigration (Friel et al., 2013). One
of such examples is of European Union as the member nation had no trade barriers in the other
entire member nations. However, things have changed post-Brexit as there will be trade barriers
between the other European Nations and the United Kingdom (Vardavas, Filippidis & Agaku,
2015). The Common Market concept may prove to be extremely beneficial for the proposed
KFC franchise outlets in countries that are close to Australia. This will help the company to get
labors from other nations that are close to Australia. Moreover, the franchise outlet will be able
to get cheaper labors, which may or may not be available in Australia (Shen & Xiao, 2014).
The Economic and Monetary Union is one step ahead of the common market. It deepens
into the prospect bringing closeness to the different economy in respect to common currency,
harmonization in tax rates, equivalent fiscal and monetary policy. This is a much better state
when different member nations will share the same currency rates and will have the same

5IMPACT OF REGIONALIZATION ON PROPOSED BUSINESS
policies for tax rates & other benefits. Common tax rates are indeed a much better relief to small
businesses (Sawyer, 2013).
Economic integration is done with the help of two factors negative integration and
positive integration (Sawyer, 2013). Negative Integration helps to eliminate the barriers that
prevent a free flow of goods, factors of production and services (Sawyer, 2013). Positive
Integration means the creation of common sovereignty with the help of modifications in the
existing institutions (Sawyer, 2013).
Regional Trade Agreements that became popular in the later part of the 20th century
serves some objectives, which are as follows:
 To facilitate higher trade gains as business will be limited only to few countries than just
expanding to a multilateral level (Friel et al., 2013)
 To strengthen the domestic policy reform (Friel et al., 2013)
 To increase the bargaining power at the multilateral level as the two-member nation will
then be able to negotiate an agreement with the third country at the multilateral level in
regards to the common external barriers (Friel et al., 2013)
 To facilitate access to a larger market like the agreement between the United States and
Canada (Friel et al., 2013)
 To get business security in member state through the Regional Trade Agreements (Friel
et al., 2013)
The Trans-Pacific Partnership Agreement (TPP) is one of such examples of member nation
trade agreement. The TPP currently has several negotiating nations like Australia, Brunei, Chile,
Canada, Mexico, Japan, Malaysia, Singapore, New Zealand, Peru and Vietnam (Fooks &

6IMPACT OF REGIONALIZATION ON PROPOSED BUSINESS
Gilmore, 2014). The agreement was a landmark achievement of the 21st century, which had the
following objectives for it (Fooks & Gilmore, 2014):
 To avail a comprehensive market access to get either a reduced tariff and non-tariff
related barriers or to eliminate it
 To facilitate a seamless production and development process across the different member
nation in the TPP
 To address to new challenges with effective use of innovation and technology
 To help small and medium-sized business by informing them the opportunities that the
agreement provides an addressing to the challenges that such businesses may face
 To facilitate a regional economic integration and to also include the Asia-Pacific region
as additional economies
Explaining major internal and external contextual factors and how they affect business
structures and strategy:
The internal and external contextual factors can well be categorized as the internal and
the external business environment, which affects the business performance. The case study
organization is KFC franchise outlet, which has been planned to open in five different branches
in the Melbourne city and then to help it to spread through entire Australia. The future plan for
the business is to consider an elevated expansion through the regionalization. The business will
be impacted by its internal business environment and the external business environment in
Australia. The impact will be much bigger once it moves beyond Australia.
Internal contextual factors and their effects on the business structure:

7IMPACT OF REGIONALIZATION ON PROPOSED BUSINESS
This can be understood with the help of SWOT analysis, which may impact the business
as follows:
Strengths- KFC has a global presence, which may also help the franchise outlet that has been
planned for the Melbourne city (Zhu, Anagondahalli & Zhang, 2017). Customers will come in
the name of the brand; however, the franchise outlets may not afford to compromise on the
quality part which the customers are familiar with.
Weaknesses- Unhealthy fats may be a serious challenge for the outlets (Zhu, Anagondahalli &
Zhang, 2017). They need to be extremely focused on what they are targeting. They indeed need
to offer accordingly to avoid any negative consequences. Additionally, many franchises have
their relations broken with the KFC, which means the proposed franchise outlets need to follow
the policies of KFC to avoid any such consequence.
Opportunities- Rise in health-conscious people can be an opportunity for the outlets (Zhu,
Anagondahalli & Zhang, 2017). They should give high values to health-related ingredients in
their foods.
Treats- Competition from the rival companies like McDonald is a threat. Rapidly changing
eating habits of consumers is another threat. Fluctuating prices of raw materials is also a threat
(Zhu, Anagondahalli & Zhang, 2017).
External contextual factors and their effects on the business structure:
Political- Operation in Australia and in the member nation of the Trans-Pacific Partnership
Agreement (TPP) in future will remain smoother provided the outlets do not get stuck with the
product’s quality (Kapczynski, 2015).

8IMPACT OF REGIONALIZATION ON PROPOSED BUSINESS
Economic- The TPP agreement will provide bigger markets like Canada, Singapore, and
Australia. Such markets will provide potential customers, which are good for business growth
(Kapczynski, 2015).
Social- Regionalization will provide a broader range of customers in the different member nation
within the TPP agreement (Filser, Kraus & Märk, 2013).
Technology- The franchise outlets will get technological benefits in different nations like
Australia, Canada, Singapore and Japan (Arshad et al., 2014). Moreover, the outlets will be able
to use the different technologies that can effectively improve its customer service and product’s
quality.
Environmental- They need to have answers for consumer's rising concerns for healthy foods.
This is necessary to get success in countries other than Australia (Vanevenhoven & Liguori,
2013).
Legal- The TPP agreement will provide a much-needed support in the different member nation.
Moreover, the outlets will have fewer barriers in trade tariffs, tax rates and fiscal policies
(Vanevenhoven & Liguori, 2013).
Providing well justified and feasible business recommendations based on the analysis
conducted:
To recommend, the franchise outlets need to follow the instructions set by KFC as the
company has canceled the license of few franchises. It means there is a need to have a good
relationship with the parent company. The relationship will remain smoother if it follows the

9IMPACT OF REGIONALIZATION ON PROPOSED BUSINESS
business strategies of KFC. Moreover, they are also required to be cautious while selecting the
ingredients to satisfy the needs of those consumers who are conscious of their health.
Conclusion:
To conclude, the proposed franchise outlets of KFC have better opportunities in the form
of regionalization as this will offer the benefits, which was assumed while establishing the
Trans-Pacific Partnership Agreement (TPP) agreement in the 20th century. However, the different
franchise outlets need to follow the set guidelines of KFC in order to avoid the cancellation of
license. This will not only hamper the business but will also kill the chances of expanding to
other member nation of TPP.

10IMPACT OF REGIONALIZATION ON PROPOSED BUSINESS
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