Professional Documents
Culture Documents
Of
International Business (IBS 3121)
On
International Business Operations of Transcom Foods Limited
Prepared for
E
Date of Submission
Executive Summary
The term paper explains how Transcom Foods Ltd. (TFL) a subsidiary of Transcom Group works
with the worlds largest and popular chain restaurant franchisor Yum! Restaurant International
(YRI)s KFC franchise. The discussions mainly intended to provide what it takes for TFL to do
business with YRI by stepping into food and restaurant industry as a part of international
business.
Firstly, we have discussed about the brand image of KFC, the extent of its popularity in the world,
and for that what compliances TFL needed to fulfill to be the sole franchisee in Bangladesh. It
included the training, funds, and the right amount of passions that TFL needed to deliver have
been mentioned thoroughly discussed.
The agreement comes then with what amount of obligations, provisions, price, and other vital
issues that is added in the franchise agreement between TFL & YRI. The most critical points
which are emphasized here are trade restrictions, assignment of TFL, and termination of
provisions. Right after that the financial terms between TFL & YRI, that has royalty payment of
6% of gross sales, 15% of rental payment, and many other fees with contract renewal period of 5
years.
Meeting up with all these above required fundamental elements, YRI comes toward its Global
Franchise Partnering with TFL. This consists of one system approach with 5 principles brand,
product & franchising excellence with market development. The market growth and customer
service of KFC that is maintained by TFL is analyzed with demographic, halal compliance, and
unique flavored food to customer accommodation. Here we have expressed the competitive
advantage that TFL possess due to the first ever international chain restaurant franchisee of Pizza
Hut and how it can have positive impact on KFC as well.
Then the major component of KFC, the chicken is described with full features. How it processed
and supplied with the strict international regulations that has been set by YRI, such as
transporting, holding or procedures of humane slaughtering. Another most important factor
involved with both TFL & YRI is legal, environmental & economic issues of international trading in
Bangladeshi perspective. Where it is shown that the legal restrictions, convertible risks, cultural
differences, and pricing restrictions impacts both the parties. Most significant from these
environmental issues which expressed political instability, corruption and bureaucracy that slows
down the business activity and hampers the local run of the business for YRI through TFL.
Lastly in the problems & recommendations section where we have identified two problems that
KFC has faced in the recent past in Bangladesh, one with poor handling of bird flu which raises
the price unusually higher for KFC food than rest of the world; secondly, the anti-American
sentiment that is building up for killing innocent people in war affected countries like Palestine.
Where for the first problem we recommended to run campaign promoting to cook chicken in
right amount of temperatures, and launch campaign to stand against the killing of innocent
people in the so called war against terrorism.
Contents
Page #
PART A --------------------------------------------------------------------------- 1 2
(I) About Transcom Group --------------------------------------------------------------------------------------- 2 2
PART B ------------------------------------------------------------------------- 3 18
(I) Transcom Foods Limited (TFL) ------------------------------------------------------------------------------- 4 4
(II) Franchise Requirements ------------------------------------------------------------------------------------ 5 5
(III) Training & HR ------------------------------------------------------------------------------------------------ 6 7
(IV) TFLs Franchise Agreement ------------------------------------------------------------------------------- 8 8
(V) Costs & Profits involved in the Franchise --------------------------------------------------------------- 9 9
(VI) Global Franchise Partnering -------------------------------------------------------------------------- 10 10
(VII) Market Growth & Customer Service of KFC ------------------------------------------------------ 11 12
(VIII) KFC Poultry Welfare Guidelines --------------------------------------------------------------------- 13 14
(IX) Legal, environmental & economic implications -------------------------------------------------- 15 17
(X) TFLs Business Benefits ---------------------------------------------------------------------------------- 18 18
PART C ------------------------------------------------------------------------ 19 20
(I) Problems & Recommendations ------------------------------------------------------------------------ 20 20
SOURCES ------------------------------------------------------------------------ 21 21
Part A
ORGANIZATION PROFILE
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The key and most influential person of Transcom Group is Mr. Latifur Rahman, Chairman &
CEO of Transcom Group. The companys head office is located in Gulshan Tower (Plot# 31,
Road# 53, Gulshan North C.A, Gulshan-2, Dhaka-1212, Bangladesh).
The term paper is based on Transcom Foods Ltd (TFL), and it explains
their international ties and business dealings as a TFL of KFC, a
subsidiary company of the worlds largest restaurant company Yum!
Restaurants International (YRI) which is situated in Louisville,
Kentucky, U.S.
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Part B
BUSINESS OPERATION
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Franchise Requirements
The initial core requirements were the customer oriented spirit, right infrastructure and
funds that needed by the TFL were as follows:
To become a "Customer Maniac": Someone that understands that success comes from
putting the customer first.
Becoming ambitious and driven, and having the vision and desire to succeed.
After verifying the credibility of all these above, TFL has received:
Training: TFL and its senior team required to attend a 12 to 16 week training session at
Yum!s training centers and selected restaurants.
Finally, TFL got YRI (Yum! Restaurants International) Global Franchise Partnering System
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Training & HR
KFC believes People Capability First Satisfied Customers and Profitability Follow based
on this philosophy YRI set up and provided the extent and logistic support and sharing the
ideas for the management and staff of TFL.
Here TFL and YRI tries to follow the same range of human resource to have that the other
KFC franchises have throughout the world for ensuring to give almost same the customer
service experience that any customers will get from other KFC restaurants in other parts of
the world.
KFC human resources department acts as a business partner to other areas of the
organization and for this reason must be aligned with the business strategies of the
organization. Some of the key contributions the human resources function makes to the
success of KFC are:
Attracting, recruiting and selecting the best possible employees for the organization
Training and developing employees to reach their maximum career potential.
This also enables the company to benefit from its employees improved skills and
knowledge
Providing a strong performance-based reward system, e.g. compensation, bonuses and
promotions, to ensure that employees are performing at their optimum and that they are
adequately recognized for their efforts
Providing systems and tools for managing human resources processes
Ensuring Occupational Health & Safety (OH&S) procedures are correctly implemented, and
Ensuring the organization complies with industrial relations laws.
Employee retention is an important issue for the quick-service restaurant industry where
the average Team Member turnover is approximately 80 percent annually. KFC recognizes
that high Team Member turnover can lead to low employee morale, the loss of cumulative
experience and difficulty attracting the right employees. This downward spiral would affect
its profitability.
Therefore TFL makes managing Team Member turnover a high priority for its Restaurant
Managers and as a result currently operates at impressively low industry Team Member
turnover levels of 55-60 percent annually. Another of the TFL Human Resources
Departments key responsibilities is to ensure that Yum!s How We Work Together principles
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are firmly entrenched within the KFC culture. These values underpin the way the
organization operates, measures itself and structures how its employees work together and
are therefore extremely important for driving people capability.
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Brand Excellence
Market Development
Product Excellence
Restaurant Excellence
Franchising Excellence
Organizational Excellence
Financial Excellence
Passion
Founding Truths
Work Together Principles
Partnership Pact
Dynasty Model
All together YRIs System and Culture form the YRI Way, and TFL upon these foundations run
their business to obtain their profitability and growth which also plays a major role for
extending the franchise agreement between YRI & TFL for each future specified period of
time.
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Catching
KFC's guidelines also provide that every reasonable precaution should be taken to minimize
injury to birds arriving at our suppliers' plants.
Transport
KFC's guidelines call for transport crates to be in good repair. KFC recommends that there
should be no crate damage that would allow injury to birds or allow crates to accidentally
open.
Holding
Birds held in storage sheds by our suppliers should be provided adequate ventilation.
Humane Slaughter
Slaughter equipment at all supply facilities should be properly maintained to confirm that
the birds are slaughtered quickly.
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It is focused on attracting customers who prefer healthier options which is halal and
hygiene. It offers an increasingly popular range of set meals that cater to the health
conscious. The KFC Roasted Chicken coupled with home-styled side dishes. And king-size
fresh fruit juices and milk shakes, where the fruits and other components are examined
carefully and that is surely are confirmed to any health conscious customer.
It is stated that if the Audit committee find any irregularities carrying out the standard
procedures of TFL mismanagement regarding the supplies of the chicken for which any
health problems arise and degrades the Brand image of KFC. It will be considered as a
breach of the franchise agreement between TFL & YRI and it may be considered invalid from
the YRI management.
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Labor laws
No franchising contract can derogate from the countless Bangladeshi labor laws. Labor laws
governing the day to day conditions of TFLs employment and termination of employees in
times of shutting down the business or change in the franchise.
Country-level factors include for YRI including legal restrictions, political risk, cultural
distance/national culture, corruption, institutional characteristics, political stability and
market size.
Cultural differences
The distance of possible cultural differences between the two countries here its Bangladesh
& U.S. in terms of behavior, methods of working and organizational practice makes
integration with the unfamiliar environment of Bangladesh, it would have increased the cost
of YRI. However YRI managed to reduced it through TFL to handle all the required business
procedures and setting up of all business operations. As a result it helped YRI to cope with
the unfamiliar culture of Bangladesh with the help of TFL to blend in more to the local
responsiveness of the target market customers.
Convertibility Risk
The exposure is tolerable here in Bangladesh. The Foreign Investment Act guarantees the
right of transfer of invested capital, profits, capital gains, and approved royalties and fees
for YRI. Bangladesh Bank does not fix the exchange rate against foreign currencies, but it
regulates conversion. The Bangladeshi Taka is almost fully convertible for current account
transactions, such as import trade and travel needs, but not for capital account transactions,
such as investing. TFL needs to import often the equipment and logistics from the
prescribed YRIs manufacturing points to maintain KFCs international standards. All these
measured under this government set convertible options.
Pricing Restriction
TFL reported to YRI that due to inefficiencies in monitoring the market price level different
commodities, the price level of most products get higher. VAT and excise taxes are imposed
at various rates, depending on the class of goods, but are not uniformly collected from all
sellers in the marketplace. Enforcement sometimes discriminates against foreign suppliers,
giving domestic suppliers an implicit price subsidy. Which is why, a major supply of KFC are
now started to come domestically to TFL.
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Corruption
TFL and YRI management often report their experiences with high corruption, such as
paying extra fees for obtaining government services (post office boxes, utilities, licenses,
customs clearance).
Both TFL and YRI constantly deal with the bureaucracy of Governance, institutions and
regulation in Bangladesh, periodic political unrest and with the Market Challenges &
opportunities from the other competitors of this rising restaurant industry of Bangladesh.
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TFL making the task a bit easier for them because here YRI provided them with a
business format which is already established worldwide with a brand that
represents high quality.
TFL reduces the chance for failure. A significant amount of franchise fails if
franchisor steps in an unknown territory all by itself. Which YRI did not do, where as
TFL made them provide with all the support as a locally established business firm to
operate the franchise successfully.
Since they become affiliated with such highly recognized giant restaurant chain like
Yum! TFL has increased the credit worthiness. They can easily finance their any
viable projects by applying within a very short period of time from any financial
institutions. As a result TFLs purchasing power has been increased.
TFL gets the results of the research and development that are done by the YRI
regarding the restaurant industry business and may use it to develop future
different business ventures by themselves.
TFL currently has the only privileged rights to franchise KFC throughout Bangladesh.
And last but not least; one of the worlds best known franchise name like KFC
becomes quite easy and convenient at the time when TFL negotiates for desirable
outlets sites with the building owners.
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Part C
PROBLEMS & RECOMMENDATIONS
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KFC operates worldwide with a brand that ensures trust with a premium quality of Fast
Foods. However recently worldwide they are facing allegations of hygiene issues. It is mainly
because of preparing the chickens. In recent times like the whole world Bangladesh also was
also affected by Bird Flu disease.
Here TFL addressed theses issues poorly; their supply of chicken got reduced and raised the
prices very higher than the usual KFC worldwide outlets. This hampered most of the
consumers greatly. YRI and TFL were able to do it because of other reasons as well that we
have discussed under legal, environmental and economic implications.
Due to lack of functions for consumer rights and politically unstable, corrupt and
bureaucratic government, and these may have encouraged KFC to take those policies. As a
result few portions of customers adapted switching to others.
Other disfavoring effects KFC need to deal with is Anti-American sentiments. As Bangladesh
is a Muslim major nation, these types of problems emerge when innocent Muslims are killed
in the wars in Afghanistan, Palestine and Pakistan. With that customers avoid to go to the
outlets and again switch to other quick service restaurants.
To tackle these issues TFL and YRI certainly need to work together. TFL to fight Bird Flu can
take measures which ensure proper vaccinations by its suppliers and raise the awareness
that the fried chickens are cooked in a proper amount of heat to kill the germs of the flu.
Moreover make themselves accountable voluntarily to consumers of Bangladesh by
undertaking several constructive promotional campaigns and big events. On the other hand,
YRI can launch a worldwide campaign to stand against the killing of innocent people in the
so called war against terrorism.
Hopefully these steps can alleviate a bit the impressions on KFC in the minds of the
customers and overall help TFL and YRI to operate more smoothly in the markets of
Bangladesh with greater market share and profitability.
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This term paper has covered information regarding Transcom Foods Ltd. (TFL) & Yum!
Restaurants International (YRI) extensively from many websites, where a significant amount
comes from the following sources:
http://www.transcombd.com
http://www.yrigfp.com
http://www.kfc.com
http://www.kfcfranchise.com
http://www.afrbiz.com.au
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