1.

0 Introduction

Managerial Economics is the study where managers make various decisions regarding price,
cost, revenue, marginal revenue, profit, incremental interests, demand decisions, supply
decisions etc. based on the theories of economics. In this assignment we have applied various
tools such as demand-supply, price-cost-profit relations of KFC (fast-food chain). Since
managerial economics is an applied economics we have applied the tools in decision making
and identifying measures for KFC. Numerical values are based on Mirpur branch. There were

2.0An Overview To KFC

KFC, also known as Kentucky Fried Chicken is an American fast food restaurant chain that
specializes in fried chicken. Headquartered in Louisville, Kentucky, it is the world's second-largest
restaurant chain (as measured by sales) after McDonald's, with almost 20,000 locations globally in
123 countries and territories as of December 2015. The chain is a subsidiary of Yum!Brands, a
restaurant company that also owns the Pizza Hut, Taco Bell, and Wing Street chains.

History

KFC was founded by Colonel Harland Sanders, an entrepreneur who began selling fried chicken from
his roadside restaurant in Corbin, Kentucky during the Great Depression. Sanders identified the
potential of the restaurant franchising concept, and the first "Kentucky Fried Chicken" franchise
opened in Utah in 1952. KFC popularized chicken in the fast food industry, diversifying the market
by challenging the established dominance of the hamburger. By branding himself as "Colonel
Sanders", Harland became a prominent figure of American cultural history, and his image remains
widely used in KFC advertising. However, the company's rapid expansion overwhelmed the aging
Sanders and he sold it to a group of investors led by John Y. Brown Jr. and Jack C. Massey in 1964.

KFC was one of the first American fast food chains to expand internationally, opening outlets in
Canada, the United Kingdom, Mexico, and Jamaica by the mid-1960s. Throughout the 1970s and
1980s, it experienced mixed fortunes domestically, as it went through a series of changes in corporate
ownership with little or no experience in the restaurant business. In the early 1970s, KFC was sold to
the spirits distributor Heublein, which was taken over by the R.J. Reynolds food and tobacco
conglomerate; that company sold the chain to PepsiCo. The chain continued to expand overseas,
however, and in 1987, it became the first Western restaurant chain to open in China. It has since
expanded rapidly in China, which is now the company's single largest market. PepsiCo spun off its
restaurants division as Tricon Global Restaurants, which later changed its name to Yum!Brands.

KFC's original product is pressure fried chicken pieces, seasoned with Sanders' recipe of 11 herbs and
spices. The constituents of the recipe represent a notable trade secret. Larger portions of fried chicken
are served in a cardboard "bucket", which has become a well-known feature of the chain since it was
first introduced by franchisee Pete Harman in 1957. Since the early 1990s, KFC has expanded its
menu to offer other chicken products. KFC is known for its slogans "Finger Lickin' Good", "Nobody
does chicken like KFC" and "So good".

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In Bangladesh, the first KFC outlet was opened at Gulshan in 2006. As of June 2016, the country is
home to 20 KFC outlets 18 of which are inside Dhaka City.

Secret Recipe

A copy of the recipe, signed by Sanders, is held inside a safe inside a vault in KFC's Louisville
headquarters, along with eleven vials containing the herbs and spices.[14][15] To maintain the secrecy of
the recipe, half of it is produced by Griffith Laboratories before it is given to McCormick, who add
the second half.

In 1983, William Poundstone conducted laboratory research into the coating mix, as described in his
book Big Secrets, and claimed that a sample he examined contained only flour, salt, monosodium
glutamate and black pepper.[17] KFC maintains that it still adheres to Sanders' original 1940 recipe.[18]
In Todd Wilbur's television program Top Secret Recipe, the Colonel's former secretary, Shirley
Topmiller, revealed that Sanders learned from his mother that sage and savory are good seasonings
for chicken.[19] Also, Winston Shelton, a former friend of the Colonel's, revealed that the secret recipe
contains Thalassery black pepper.[19]

In August 2016, the Chicago Tribune reported that Joe Ledington of Kentucky, a nephew by marriage
of Colonel Sanders, had claimed to have found a copy of the original KFC fried chicken recipe on a
handwritten piece of paper in an envelope in a scrapbook.[21] Tribune staffers conducted a cooking test
of this recipe, which took several attempts to get right.[21] They had to determine whether the "Ts"
meant tablespoons or teaspoons, and soon concluded the correct interpretation was tablespoons. After
some trial and error, they decided the chicken should be soaked in buttermilk and coated once in the
breading mixture, then fried in oil at 350 degrees Fahrenheit until golden brown. They claimed that
with the addition of MSG as a flavor enhancer, they could produce fried chicken which tasted
"indistinguishable" from fried chicken they had purchased at KFC.[21]

The recipe found by Joe Ledington reads as follows 11 Spices – Mix With 2 Cups White Fl.

1. 2/3 Ts Salt

2. 1/2 Ts Thyme

3. 1/2 Ts Basil

4. 1/3 Ts Oregano

5. 1 Ts Celery salt

6. 1 Ts Black pepper

7. 1 Ts Dried mustard

8. 4 Ts Paprika

9. 2 Ts Garlic salt

10. 1 Ts Ground ginger

11. 3 Ts White pepper

2
 SWOT of KFC

Strengths

1. Second best global brand in fast food industry in terms of value ($ 6 billion). KFC is known
by many and is a trustworthy brand in many countries mainly due to its early franchising and
international expansion.

2. Original 11 herbs and spices recipe. KFC original chicken recipe is a trade secret and a source
of comparative advantage against firm’s competitors.

3. Strong position in emerging China. KFC receives half of its revenue from China, where it
operates more than 4,000 outlets. KFC position in China is one of its main strengths as
China’s fast food market is growing steadily.

4. Combination of KFC – Pizza Hut and KFC – Taco Bell. KFC partnership with other Yum!
Brands yields some advantage as the restaurant can offer items from its partners it doesn’t
have itself and satisfy more customers’ needs.

5. KFC is the market leader in the world among companies featuring chicken as their primary
product offering. KFC has positioned itself clearly among other fast food chains bearing its
famous slogan and trademark chicken products.

Weaknesses

1. Untrustworthy suppliers. Over the years, KFC has been contracting suppliers, which supplied
contaminated poultry to KFC or were mistreating chicken, thus resulting in falling sales and
damaged reputation.

2. Negative publicity. KFC receives much criticism from PETA over the conditions chickens
have been raised. Furthermore, it received bad publicity for selling chicken wing with kidney.
There are many more or less bad news from KFC, which damage firm’s reputation
significantly.

3. Unhealthy food menu. KFC menu is largely formed of high calorie, salt and fat meals and
drinks. Such menu offering prompts protests by organizations that fight obesity and hence,
decreases KFC popularity. Consumers also often opt out for healthier choices.

4. High employee turnover. Employment in KFC is a low paid and low skilled job. It results in
low performance and high employee turnover, which increases training costs and add to
overall costs of KFC.

Opportunities

1. Increasing demand for healthier food. While demand for healthier food increases, KFC could
introduce more healthy food choices in its menu and reverse its weakness into strength.

2. Home meal delivery. KFC could fully exploit (it test deliver services now) this opportunity
and reach more customers.

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 3. Introducing new products to its only chicken range. KFC could introduce new meals to its
menu and offer pork, beef or only vegetarian meals, which would target wider consumer
group and would result in more costumers.

Threats

1. Saturated fast food markets in the developed economies. The fast food market in the
developed countries is already overcrowded by so many fast food restaurant chains and this
already proves to be a threat to KFC as it finds it hard to grow in the developed economies.

2. Trend towards healthy eating. Due to government and various organizations attempts to fight
obesity, people are becoming more conscious of eating healthy food rather than what KFC
has mainly to offer in its menu.

3. Local fast food restaurant chains. Local fast food restaurants can often offer a more local
approach to serving food and menu that exactly represents local tastes. Although KFC does a
great job in adapting its own menu to local tastes, the rising number of local fast food chains
and their lower meal prices is a threat to KFC.

4. Currency fluctuations. KFC receives part of its income from foreign operations. That income
has to be converted into dollars and may affect the business' profits, especially when the
dollar is appreciating against other currencies.

5. Lawsuits against KFC. KFC has already been sued for many times and lost quite a few
lawsuits. Lawsuits are expensive as they require time and money. As KFC continues to
operate more or less the same way, there is high probability for more expensive lawsuits to
come.

3.0 Corporate Social Responsibilities of KFC

3.1 Food Promise Throughout each day, our trained cooks freshly prepare fried chicken using the
Colonel’s Secret Recipe of 11 herbs & spices. It takes more than 25 minutes to hand bread and cook
our chicken before it’s ready for your bucket or boxed meal. That’s why KFC has the world’s best
chicken.

 We use 100 percent real chicken raised on U.S. farms.

 Our chicken is USDA inspected for quality before it can be delivered to our kitchens.

 Our chicken is free of added hormones and steroids. In fact, FDA regulations prohibit the
addition of hormones in poultry in the U.S.

 By the end of 2018, all chicken purchased by KFC U.S. will be raised without antibiotics
important to human medicine.

 All of our menu items are free of food dyes (with the exception of beverages and third-party
products). In addition, artificial colors and flavors will be removed from our Core products by
the end of 2018.

4
3.2 Diversity & Inclusion

They know that diversity and inclusion are critical to the long-term success of our business and
believe that everyone can and does make a difference in our organization. One of our main principles
– Believe in All People & Be Your True Authentic Self – represents how they focus on coaching and
supporting every individual to grow to their full potential.

In 2015, they established a diversity and inclusion council called Leading Inclusion for Tomorrow
(LIFT) to continue elevating the importance of diversity and inclusion in our business. LIFT is
comprised of internal and external ambassadors who are challenged to solicit feedback, share insights
and support actions that drive global inclusion and engagement efforts reflecting the diversity of our
customers, employees and communities.

They also continued to build learning experiences in 2015 – including unconscious bias training – that
increases multicultural competency, improves communication skills, builds better teams and drives
creativity and innovation.

3.3 Community Grants

Through our Colonel’s Community Grants program, KFC U.S. Community Relations strives to make
our community better by providing sponsorship, partnership and donation support for nonprofit
organizations. We focus our outreach primarily on hunger relief efforts; however, some grants are
available for programs and events that promote community building, as well as growth opportunities
for youth in and around KFC’s hometown of Louisville, KY.

3.4 Animal Welfare

The well-being of animals used in the production of foods for our restaurants is very important. Yum!
Brands works closely with the experts on our Animal Welfare Advisory Council to ensure application
of science-based, humane animal handling practices. Our suppliers are expected to humanely handle
animals and we monitor their performance. Our goal is to work only with suppliers that demonstrate
and maintain compliance with animal welfare practices.

Animal Welfare Advisory Council

Yum! Brands has a track record of leadership in animal welfare. Our U.S. animal welfare leadership
program began with the formation of the Animal Welfare Advisory Council in 2003. The Council
helps us to continuously research new methods for both welfare advancement and viability that will
ultimately determine the adoption of improved practices.

The Council was instrumental in developing the Guiding Principles for our Animal Welfare Program.
These Principles, which apply to all poultry, pork, and beef suppliers across the U.S., focus on:

5
  Animal treatment

 Partnership with industry experts

 Ongoing training and education

 Performance quantification and supplier improvement

 Communication with industry leaders

The consistency of establishing set standards for our brands has allowed our suppliers to concentrate
on compliance and continuous improvement.

The adoption of the American Meat Institute slaughter audit protocols for both beef and pork
suppliers empowered our suppliers to focus their efforts in accordance with these well established and
broadly respected standards.

Additionally, the Council has been working closely to align on core values on animal welfare
globally, creating audit documents and policies that address issues of well-being and establish an
environment that assure continuous improvement.

Our suppliers continue to work diligently with us regarding animal welfare issues, understanding the
requirements of our program and the expectations of our customers. The chicken, beef and pork
industries have addressed these issues earnestly and positively, recognizing that their customers and
ours require assurance that animal welfare is taken seriously. We also continue to be a positive force
in promoting good welfare practices and the necessity for validation within the industry. We are
frequently invited to speak to industry groups, as well as government and public symposia, about
animal welfare issues and developments.

3.5 External Consultation

While our standards for animal welfare are high, we seek knowledge from external sources to improve
our practices where appropriate. In the U.S., KFC has contributed to the work of the American
Association of Avian Pathologists (AAAP) and has previously been represented on two AAAP
Welfare subcommittees. Yum! Brands is viewed by experts in academia and our industry as
possessing valuable insight about advancing animal welfare; addressing legitimate issues with
prudence and deliberation to foster incremental improvement.

International Focus

Yum! Brands established the Global Animal Welfare Program with input from the U.S., UK and our
Animal Welfare Advisory Council. This program, which is based in science and best practice, allows
for adjustments to cover local needs and regulations.

This global program promotes a consultancy approach to drive a better understanding of our
objectives and animal welfare in general, especially with respect to developing countries. Our
collaborative approach with suppliers has fostered a trusting partnership and we are asked to provide
input when challenges arise. We also encourage our suppliers to invest in research and development
that leads to improvements in animal welfare.

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Partnering with our suppliers on a journey of common goals and continuous improvement has resulted
in a balanced approach benefiting animals, suppliers and our consumers who appreciate knowing that
their food is coming from an ethical source.

We have seen significant positive trends in performance indicators of good animal health and well-
being from our suppliers. Performance data is analyzed, ranked and benchmarked against the best
performers in the Yum! Brands Supply Chain. Through this process, suppliers are informed of their
strengths and weaknesses compared to other players in our supply chain, thus encouraging
improvement in key areas.

3.5 Environment

Environmental stewardship is at the heart of how we do business. With nearly 43,000 restaurants and
our rapid growth around the globe, we acknowledge our role to be environmentally responsible
corporate stewards. We are committed to reducing our environmental footprint for the benefit of our
customers, stakeholders and planet, as we feed the world. We believe we can continue to maximize
our profit growth and increase our shareholder value, while reducing our environmental impact and
serving the food our customers love.

Yum! Brands welcome the opportunity to drive environmental sustainability priorities and best
practices into our day-to-day business. We do this following the principles that we use to operate great
restaurants, namely by educating our people and setting breakthrough goals.

3.6 KFC CSR Campaign to end hunger: Wall of Hope

Hunger has a higher death toll worldwide than malaria, Aids and TB combined. KFC South Africa
launched a campaign to fight hunger. The campaign highlighted the issues of world hunger, sought
donations and educates consumers on KFC’s contribution towards this program. The wall of hope

was a chain of more than 5000 kids and each kid had an empty stomach which with the shoppers
could place a change, demonstrating that the donations are directly going to feed the hungry children
(Figure1). The program was a great success.

7
 4. Products Offered By KFC Bangladesh

Category Product Price (in Taka)

Chicken Dips Bucket 849
4 Piece Set 520
2 Piece Set 265
12 Piece Set 1499
Best of KFC 999
12 Set Fiery Grilled 1499
8 Set Fiery Grilled 999
4 Set Fiery Grilled 520

Burger Doritos Crunchy 299

Super Changer 229
Hot Zinger 289
Chicken Zinger 279
Veggie Zinger 269

Meal Deals 5in1 Rice Meal 289

5in1 Zinger Set 399
Hot Zinger Meal 409
Snack Meal 379
5in1 Super Changer Meal 429

Rice Meals Spicy Thai Chicken Rice 279

Mushroom Rice 279
Chicken Rizzo Rice Meal 199

Snacks 3 Set Stripes 249

6 Set Stripes 169
3 Hot Wings 139
6 Hot Wings 259
Coleslaw 79
Chicken Snack 129
Rizzo Rice 99

Drinks Mountain Dew 500ml 25

Pepsi 500ml 30
7 Up 500ml 30
Aquafina 500ml 15

Current offer Menu Dips Bucket 849

Doritos Crunchy Burger 299

8
 5. Total Revenue And Price Relation

4 major products are selected out of all the products since all of them will result in the same thing
which is increase in total revenue with increase in quantity. Prices are not going down anytime soon
in the short run. So marginal revenue is same and total revenue increases with quantity. Price will not
go down if quantity increases.

Product Price Quantity Total Revenue Marginal Revenue

Regular 2 set chicken 265 0 0
265 1 265 265
265 2 530 265
265 3 795 265
265 4 1060 265
265 5 1325 265
265 6 1590 265
265 7 1855 265
265 8 2120 265
265 9 2385 265
265 10 2650 265

Zinger Burger 289 0 0

289 1 289 289
289 2 578 289
289 3 867 289
289 4 1156 289
289 5 1445 289
289 6 1734 289
289 7 2023 289
289 8 2312 289
289 9 2601 289
289 10 2890 289

Rizzo Rice 99 0 0
99 1 99 99
99 2 198 99
99 3 297 99
99 4 396 99
99 5 495 99
99 6 594 99
99 7 693 99
99 8 792 99
99 9 891 99
99 10 990 99

Chicken Rizzo Rice Meal 199 0 0

199 1 199 199
199 2 398 199
199 3 597 199
199 4 796 199
199 5 995 199
199 6 1194 199
199 7 1393 199
199 8 1592 199
199 9 1791 199
199 10 1990 199

9
 5.1 Graphical Representation of Total Revenue And Price Relation

Since it is a restaurant chain that focuses on selling more other than cost minimization the marginal
revenue will always remain same and increase in quantity will increase the total revenue. More selling
is more revenue. They are so large that in this state they do not care about customer retention and
customer capturing. Customers know them and come by themselves as they are loyal.

Graph1: trend in Regular 2 set chicken

3000

2500 2650
2385
2000
2120
1855
1500
1590
1325
1000
1060
500 795
530
0 265
1
0 2 3 4 5 6 7 8 9 10 11

Graph2: trend in Zinger Burger

3500

3000
2890
2500
2601
2000 2312
2023
1500 1734
1445
1000
1156
867
500
578
0 289
1
0 2 3 4 5 6 7 8 9 10 11

10
Graph3: trend in Rizzo Rice

1200

1000
990
800 891
792
600 693
594
400 495
396
200 297
198
0 99
1
0 2 3 4 5 6 7 8 9 10 11

Graph4: trend in Chicken Rizzo Rice Meal

2500

2000
1990
1791
1500
1592
1393
1000 1194
995
796
500
597
398
0 199
1
0 2 3 4 5 6 7 8 9 10 11

11
 6. Cost Output Relation

There are Variable cost and fixed costs associated with total cost.

Fixed Cost = (Salary+Electricity+Maintenace+other) / Quantity = 39000/15000 = 2.6

Variable cost derived from packaging and small maintenances as an average.

Product Quantity Fixed Variable Cost Total Cost Marginal

Cost Cost
Regular 2 set chicken 0 2.6 0 2.6
1 2.6 5 7.6 7.6
2 2.6 10 12.6 12.6
3 2.6 15 17.6 5
4 2.6 20 22.6 17.6
5 2.6 25 27.6 10
6 2.6 30 32.6 22.6
7 2.6 40 42.6 20
8 2.6 45 47.6 27.6
9 2.6 50 52.6 25
10 2.6 55 57.6 32.6
Zinger Burger 0 2.6 0 2.6
1 2.6 5 7.6 7.6
2 2.6 10 12.6 12.6
3 2.6 15 17.6 5
4 2.6 20 22.6 17.6
5 2.6 25 27.6 10
6 2.6 30 32.6 22.6
7 2.6 40 42.6 20
8 2.6 45 47.6 27.6
9 2.6 50 52.6 25
10 2.6 55 57.6 32.6
Rizzo Rice 0 2.6 0 2.6
1 2.6 5 7.6 7.6
2 2.6 10 12.6 12.6
3 2.6 15 17.6 5
4 2.6 20 22.6 17.6
5 2.6 25 27.6 10
6 2.6 30 32.6 22.6
7 2.6 40 42.6 20
8 2.6 45 47.6 27.6
9 2.6 50 52.6 25
10 2.6 55 57.6 32.6
Rizzo Rice Meal 0 2.6 0 2.6
1 2.6 5 7.6 7.6
2 2.6 10 12.6 12.6
3 2.6 15 17.6 5
4 2.6 20 22.6 17.6
5 2.6 25 27.6 10
6 2.6 30 32.6 22.6
7 2.6 40 42.6 20
8 2.6 45 47.6 27.6
9 2.6 50 52.6 25
10 2.6 55 57.6 32.6

12
 7. Profit Maximization

Product Quantity Total Total Marginal Marginal Marginal

Revenue Cost Cost Revenue profit
Regular 2 set chicken 0 0 2.6 -
1 265 7.6 7.6 265 257.4
2 530 12.6 12.6 265 252.4
3 795 17.6 5 265 260
4 1060 22.6 17.6 265 247.4
5 1325 27.6 10 265 255
6 1590 32.6 22.6 265 242.4
7 1855 42.6 20 265 245
8 2120 47.6 27.6 265 237.4
9 2385 52.6 25 265 240
10 2650 57.6 32.6 265 232.4
Zinger Burger 0 0 2.6 -
1 289 7.6 7.6 289 281.4
2 578 12.6 12.6 289 276.4
3 867 17.6 5 289 284
4 1156 22.6 17.6 289 271.4
5 1445 27.6 10 289 279
6 1734 32.6 22.6 289 266.4
7 2023 42.6 20 289 269
8 2312 47.6 27.6 289 261.4
9 2601 52.6 25 289 264
10 2890 57.6 32.6 289 256.4
Rizzo Rice 0 0 2.6 -
1 99 7.6 7.6 99 91.4
2 198 12.6 12.6 99 86.4
3 297 17.6 5 99 94
4 396 22.6 17.6 99 81.4
5 495 27.6 10 99 89
6 594 32.6 22.6 99 76.4
7 693 42.6 20 99 79
8 792 47.6 27.6 99 71.4
9 891 52.6 25 99 74
10 990 57.6 32.6 99 66.4
Rizzo Rice Meal 0 0 2.6 -
1 199 7.6 7.6 199 191.4
2 398 12.6 12.6 199 186.4
3 597 17.6 5 199 194
4 796 22.6 17.6 199 181.4
5 995 27.6 10 199 189
6 1194 32.6 22.6 199 176.4
7 1393 42.6 20 199 179
8 1592 47.6 27.6 199 171.4
9 1791 52.6 25 199 174
10 1990 57.6 32.6 199 166.4

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Marginal Revenue: Marginal revenue is the increase in revenue that results from the sale of one
additional unit of output. While marginal revenue can remain constant over a certain level of output, it
follows the law of diminishing returns and will eventually slow down, as the output level increases.
Perfectly competitive firms continue producing output until marginal revenue equals marginal cost.

Marginal Revenue = difference between total revenue/difference between quantity

Marginal Cost: The marginal cost of production is the change in total cost that comes from making
or producing one additional item. The purpose of analyzing marginal cost is to determine at what
point an organization can achieve economies of scale.

Marginal cost = difference between total cost/ difference between quantity

Total Profit: A common measure of a company's success equal to the net revenue that remains once
all costs have been deducted. The total profit for a business forms the base income that is used to
compute tax and determine how much of a dividend to pay to shareholders of record.

Total Profit = Total Revenue – Total Cost

Marginal Profit: In microeconomics, marginal profit is the difference between the marginal revenue
and the marginal cost. Under the marginal approach to profit maximization, to maximize profits, a
firm should continue to produce a good or service up to the point where marginal profit is zero.

Marginal Profit = Marginal Revenue – Marginal Cost

Profit is maximum when marginal cost is equal to marginal revenue. Here since price is fixed
and not changeable in the long run, maximum revenue and cost are the true measures for
profit which depend on increase in quantity.

So the more quantity the more profit.

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 8. Demand And Supply of KFC Bangladesh

Demand for a good or service is defined as quantities of a good or service that people are ready
(willing and able) to buy at various prices within some given time period, other factors besides price
held constant. The time frame might be an hour, a day, a month, or a year. Conditions to be
considered include the price of the good in question, prices and availability of related goods,
expectations of price changes, consumer incomes, consumer tastes and preferences, advertising
expenditures, and so on. The amount of the product that consumers are prepared to purchase, its
demand, depends on all these factors. For managerial decision making, a prime focus is on market
demand. Market demand is the sum of all the individual demands.

Quantity demand has inverse relation with price level. This relation is shown below with graphic
presentation

Table:

Price in tk Quantity in piece(Denim jeans)

1000 2000

950 2500

900 3000

850 4000

Price

1000……………

950………………………..

900…………………………………….

850…………………………………………………

Quantity in thousand

15
 8.1 Demand Equation For KFC Bangladesh

The general equation for demand is

Q of Y products = (price of Y, Price of related products(X), income, interest charge, expenditure and
so on)

It says that the quantity demanded of a product is a function of these factors: price, income of the
buyer, the price of related goods, population and any expectation the consumer has of future supply,
bank interest rate and advertising expense etc.

For KFC we can express the equation (1) as below:

Q= -100P+10Px+0I+ 5Pop+5A……………(1)

Equation (1) state that P, average price of products, Px price of related goods, I income of customers, i
interest rate and A is advertising cost. Interest rate does not apply for KFC and with small customers
change in income of customers does not affect as well.

Now,

Q= -100P+10Px+0I+ 5Pop+5A…………… (1)

Let, Px= tk 10, I= tk 500, Pop= 50, and A=20

Q= -100P + 10×10 + 0×500 + 5×50 + 5×20

Q= 450-100P

Alternatively, when price is expressed as a function of quantity demand.

P= 4.5- 0.01Q (2)

Graphical Representation

4.5

4.49
4.49
4.48
4.48
4.47
4.47
4.46
4.46
4.45
4.45
4.44

4.43
1 2 3 4 5

16
 8.2 Supply Equation For KFC Bangladesh

The supply function can be expressed as

Q of Y products = f (price of Y, prices of related product X, current state of technology,

Input prices, time and so on)

For KFC the equation will be

Q = 100P – 10Px – 100W – 50Rm…..(3)

W is affecting in supply due to change in wage rate, Rm is affect due to change in cost of Raw
Materials. Other things do not apply in the short run.

Now if Px = 5, W = 50, Rm = 100 then

Q = 100P – (10x5) – (100x50) – (50x100)

Q = 100P – 10050

Alternatively, when price is expressed as a function of output, the industry supply curve can be
written as

P = 100.50 + .01Q………………………(4)

Graphical Representation

100.56

100.55
100.55
100.54
100.54
100.53
100.53
100.52
100.52
100.51
100.51
100.5

100.49
1 2 3 4 5

17
Now the using equations 2 and 4 the equilibrium will be -

450-100P = 100P – 10050

=> P = 52.5

The quantity demanded and supplied will be same when the price is 52.5 taka. However it is not
realistic since KFC at least in Dhaka is perfectly competitive market. Loyal customers will still go there
regularly and marginal change will be bare minimum within 5 years.

In reality the graph is like this for KFC since it is a perfectly competitive position

Price

Quantity

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 9. Finding And Analysis From The Study

Our study saw the following things-

 KFC focuses more on selling and increasing Q rather than minimizing TC

 Price will not change since market is perfectly competitive and may change in the long run
 Total revenue, price, costs are always upward slopping
 Demand and supply curve and the equilibrium is vague since market forces are not strong.
They have stable and loyal customers
 Demand and supply in reality is elastic
 Demand and supply function is free from the impact of interest rate and advertising costs

10. Our Recommendations

How we see KFC in Bangladesh is it is completely doing fine, still we would suggest these things-

 KFC better improve customer relations and change menus to bring variety
 Since Bangladesh is a minor marketplace for KFC, some other company should takeover it
 KFC can promote through advertisement to see or at least experiment market change

11. Conclusion

KFC is not looking for competition and is quite happy where it is placed. Capturing market is very
easy for it. Simple promotions and customer retention can pave huge way for it. However, economic
tools are not that much applicable for KFC since they focus on selling more and prices are not
changeable in the long run.

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