KFC began life as Kentucky Fried Chicken, and was founded in 1952 by Colonel Harland Sanders. The ‘Colonel’ title was an honorary one: he was not a military man, but had been compelled to earn his own living from an early age due to the untimely death of his father. His mother taught him to cook since he had the responsibility of looking after his younger brothers and sisters. During the 1930s Sanders ran a petrol station in Kentucky, and served basic meals to motorists. His panfried chicken proved extremely popular, but he was concerned about the time it took to prepare: preparing it in advance, or deep-frying the chicken rather than pan-frying it, reduced the quality of the finished meal. In 1939, the first commercial pressure cookers became available: although they were intended for steaming foods, Sanders hit on the idea of pressure-frying the chicken, which greatly reduced the cooking time. This technique is still used in KFC restaurants.

Sanders had finalised the formula for the coating on the chicken in 1940: the recipe remains a trade secret. He used the recipe in his own restaurants, but after the War he hit on the idea of franchising the concept, and restaurants began to open all over the United States. Sanders sold the chain in 1964: he was then 74 years old, and was finding the strain of running a large franchise too much......

Case study questions 

1. How can the company justify such large differences in price for what is substantially the same product? 

2. Why would KFC enter the Chinese market when the price for the product has to be kept so low? 

3. What factors should KFC take into account when deciding on the pricing of its products in a new market? 

4. Why did KFC enter into a price war in China? 

5. What might be the effect on sales worldwide if KFC was to adopt a cost-plus pricing method?