The case focuses on four major topics: (1) analysis of the fast-food industry from both a domestic and an international point of view; (2) the development of KFC’s business strategy from 1992 to 1996; (3) an analysis of KFC’s investment strategy in Mexico and Latin America; and (4) the Mexican peso crisis of 1995. This case begins by analyzing the strategic changes that took place in Kentucky Fried Chicken Corporation (KFC) as it moved through a variety of ownership changes from the 1950s through the 1980s: (1) KFC’s founding by “Colonel” Harland Sanders in 1954; (2) the sale of KFC to Jack Massey and John Young Brown, Jr., in 1964; (3) Heublein’s acquisition of KFC in 1971; (4) the acquisition of Heublein by R. J. Reynolds in 1982; and (5) PepsiCo’s acquisition of KFC in 1986.
As such, the case provides an opportunity to examine issues related to corporate diversification/ acquisition strategy and business portfolio management. The case also discusses the U.S. fast-food industry and its international dimension. It also examines KFC’s international strategy with a particular focus on Mexico, providing a vehicle for discussion of risks and opportunities of doing business in a foreign country. Some of the Strategic Issues and Discussion Questions for This Case Include:
1. How did different corporate parentage-under Heublein, R. J. Reynolds, and PepsiCo-affect KFC? 2. What motivated the three international corporations to buy KFC? 3. Can you identify any added value that each of these three firms brought to KFC? 4. What are the driving forces in the fast-food industry? 5. Using the five forces model, assess the strength of each force within the fast-food industry. 6. Complete a SWOT analysis for KFC. 7. In what ways is KFC positioned to take advantage of the industry’s key success factors? 8. What are the major strategic issues surrounding KFC’s decision to expand or freeze growth in Mexico?