Does being local, provide a comparative advantage over an iconic brand?
Chester’s is a fast food outlet, owned by Charoen Pokphard Foods Group. KFC is owned by a global company, Yum Restaurants International (Thailand). It operates more than 588 stores in Thailand and is expanding rapidly. By 2020 Yum plan on having 800 KFC outlets in Thailand. The company prides itself on being the “best restaurant in the community, and to generate jobs for locals” (Yum, 2016). The first KFC opened in Thailand more than 30 years ago. It has a business model that comprises both corporate and franchisee ownership, with only one franchisee, Central Restaurant Group (CRG) to serve Thailand’ 67.6 million people and visitors. Thailand is the 2nd largest market in the world, behind China which has 5,000 KFC outlets (Yum, 2016), giving it a strong global brand presence.
KFC is relevant and it resonates with customers, and is positioned at the top of mind of many consumers (Ries A, Trout J, 2001) because it is the world’s largest restaurant chains (Yum, 2016).
It has a revenue of US $13 billion, and 65 percent of revenue is generated outside of the United States, and brand is continuing to grow in emerging countries, where for every million people, there are 2.5 outlets (Yum, 2016). In 2015, 29 million tourists visited Thailand, 4000 approximately were from China who are also familiar with the brand (Ministry for Tourism & Sport, 2016). Its long time market exposure gives the brand with a strong “foothold” in Thailand. Tourists spend an average of 5,072.69 baht when on holidays, and some of this money is spent on food (MOT, 2016). This contributes to the gross domestic product, where economic growth which has increased by 0.9 per cent in 2015, despite a decrease in government spending and exports, domestic consumption levels in fast food have fueled the increase (MOT, 2016).
Fast foods are popular, they are quick to consume, and suit a busy target market, of particularly young people, that like the taste, and the value is in the convenience (Yum, 2016), despite the negativity surround obesity, where high salt levels are a major cause of heart, and other diseases, often caused by underestimating the amount of calories and fat consumed (Health Line, 2016).
KFC’s former franchise owner, the CP Group (Wall Street Journal, 2000), is vertically integrated conglomerate. It also owns the chicken production facility, and the Chester’s fast food outlets. By owning the supply chain, this provides a comparative advantage in supplying its own outlets, and it is also the supply chain for the food industry, including KFC (Charoen Pokphard, 2016).
Chester’s uses the same business model as KFC of both corporate and franchise structure. The company operates 198 restaurants in Thailand, less than half the amount of KFC. The company has mirror imaged the KFC marketing mix, and is selling “me too” products (CP, 2016).
Both have a similar vision, supplying a quick and efficient service, and are focused on creating the customer experience with quality and convenience products, this is part of the value creation. However, Chester’s is not an iconic brand, one that is recognized throughout the world (Armstrong, Adam, Denize, Kotler, 2012). Its disadvantage is, products are displayed in the Thai language. Its growth is restricted by not appealing to all languages, where non-speaking Thai people need to rely on the service scape, the pictures. Providing KFC with an added advantage, where all dishes are promoted in English and Thai.
However, diversification can be seen in both chains where Chester’s has added spaghetti to its menu range, and KFC had added the brand extension of Krusher’s, to supply drinks and deserts.
To penetrate the market they apply a marketing mix that creates customer value by using controllable elements to create perceptions in the minds of consumers. These include product, price, place, promotion, process, people and physical evidence (Armstong, Adam et al., 2012).
KFC products are advertised as being full of flavor, and fully loaded, creating a perception of freshness in the mind of the consumer. Global, standardised products are available, and in addition localized products have been added to the mix so that products appeal to Thai tastes (rice and spice). Chester’s has mirrored the KFC range, by also selling chicken and burgers.
Pricing is also sensitive in both outlets, where local wages and affordability have been taken into consideration, ensuring that there is products available for all income levels. The average wage is 13,774 baht per month (Trading Economics, 2016).
Promotions are transparent, with an on line ordering facility, advertising on billboards, and social media are all used to drive sales across both outlets. Stores are in prominent locations, enabling easy access for market penetration and growth. KFC promotes its products in both languages, whereas Chester’s is restricted to Thai.
Products are distributed through chain stores, and also offers home delivery. Outlets are situated in shopping centres. KFC has opened a free standing restaurants with drive-through 24 hour service (Yum, 2016). Its people are trained with an emphasis on the importance of customer service. The servicescape, including the décor, and neatly dressed staff create also an image of cleanliness in the minds of consumers. This all contributes to adding brand value.
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In conclusion, Chester’s sells “me too” products. It has adopted a similar business model to KFC. However, the strong “foothold” by being the world’s largest restaurant, cannot remove that it is an iconic brand, whereas Chester’s suffers from marketing myopia, by ignoring growth opportunities in other markets, including brand extensions and deserts, and by promoting all of its products in the Thai language, is a disadvantage to the business, and limits its market to Thai speaking people. Opportunities that both outlets could capitalise on is the Halal market, which is has been primarily ignored by both outlets.
References:
Armstong G, Adam S, Denize S, Kotler P, 2012; The Principles of Marketing, Pearson, Australia;
Charoen Pokphand Foods, 2014 (CP); Monthly, viewed on website 16th July 2016, newsletter;http://www.cpfworldwide.com/contents/investors/download/ir-newsletter/M-news0414.pdf
Euromonitor, 2016;http://www.euromonitor.com/consumer-foodservice-in-thailand/report, viewed on line 19th July 2016.
KFC, www.kfc.com, viewed on line 18th July 2016;
Health Line 2016, http://www.healthline.com/health/fast-food-effects-on-body, viewed on line 19th July 2016.
Ministry for Tourism and Sport, information provided by the Assistant Minister 12th July 2016.
Ries A, Trout J, 2001; Positioning, the Battle for your Mind, McGraw-Hill, United States of America
Trading economics, 2016; http://www.tradingeconomics.com/thailand/wages, viewed on line 19th July 2016;
Yum International (Thailand); www.yum.com, viewed on line 18th July 2016.
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