Economic Issues of KFC Essay Example | Topics and Well Written Essays - 2000 words

Economic Issues of KFC - Essay Example As the report declares most of the people already face budget constraints due to either decreasing salaries or increasing inflation. The point here is that towards the end of the day, in a recession, people find themselves with less disposable income, they take rational decisions and become thoughtful about ways for spending it. Customers become more and more price conscious and look for low priced products, low priced substitutes or discounts and others. This explains why despite of this brutal recession, low cost retailers like Wal-Mart, Target Corporation, Aldi and Asda have been able to actually pose strong sales growth over the past four years. As mentioned earlier, during recessions, people look for low cost providers since they want more value for their money. Rather than spending on premium versions of the product, people shift to lower prices thus boosting the businesses of low cost providers. This essay stresses that quite understandably, during recessions, people can cut down their purchases of luxury products or purchases, which can be delayed under normal circumstances such as alcohol, clothing, home equipment, automobiles, and others. However, food, grocery, medicine, and drinks do not come in this category. Despite the fact that KFC is serving food but when faced with financial constraints, consumers avoid dine-in at restaurants or cafes and prefer to cook food at home, which can save them money. (Hemerijck, Knapen & Doorne, pp. 230-234, 2010). They throw parities at home rather than celebrating at fast food chains. This attitude of the consumers means that the business of food retailers is more likely to grow and statistics indicate that food and grocery retail business has showed steady growth, but at the same time, revenues of fast food chains like KFC and other restaurants decreases significantly. This pattern has pushed many small restaurant chains at the brink of insolvency (Wit & Meyer, pp. 390-394, 2010). A careful analysis may reveal that during a recession, some of the competitors do not only leave the marketplace due to bankruptcy or insolvency but these economic recessions also present a unique opportunity to upper middle class entrepreneurs who are willing to take the risk. The Bank of England has set the interest rate at 0.5 percent which the record low level in the history of UK