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CBEB2103 Operations Management Project

Semester 2, Session 2012/2013

Prepared by:
1.Firmansyah Shidiq Wardhana CEB110723 2. Hakimah Bin Mohamad Mukhair CEA100027

Prepared for:

Prof.Dr.Suhaiza Hanim bt Dato Zailani Department of Operations And MIS Faculty of Business and Accountancy University of Malaya 2013

3. Haya Shadab Ali CEB110702


4. Hana Mohammed Jama CEB090711

CBEB2103 Operations Management Final Project

TABLE OF CONTENT OPERATION MANAGEMENT CBEB2103

MAIN CONTENT I. II. III. IV. V. VI. VII. VIII. IX. X. Executive Summary Introduction: Fundamentals of KFC Quality Management Dimensions of Quality in KFC Determinants of Quality in KFC Responsibility of Quality in KFC Costs of Quality in KFC Quality Control and Quality Assurance in KFC Halal Food Compliance in KFC Challenges and Recommendation KFC Quality Management Conclusion 2 3 4 5 6 7 8-9 10 12 14

APPENDICES I II VV Cover Page Table of Content Bibliography/References 1 2 15

CBEB2103 Operations Management Final Project

I.

EXECUTIVE SUMMARY OF OPERATION MANAGEMENT PROJECT

Main Objectives This report provides analysis about the operation management conceptualization in Kentucky Fried Chicken (KFC) specifically about the management of quality, total quality management and quality control as well as the elaboration toward KFCs quality assurance. This report also provides important terms, concepts, theories, models and approaches of quality managements which are implied in KFCs. The method which used to gather the data is through the press release of KFCs global site and KFCs Malaysia site as well as the previous studies about KFCs operation management in general scope. Discussions There are seven main parts which are discussed extensively into this report. The first is about the fundamental of quality management in KFC. The second and third points are about specific dimensions of quality in KFC as well as the quality service implementation in KFC within several decades of its operations. The fourth point is about the determinants, responsibility and costs of quality in KFC. The fifth point of quality management in KFCs which is taken into serious consideration is total quality management (TQM) implementation in KFC. The sixth point is about quality control of KFCs as well as the quality assurance which lies in the seventh point of quality management analysis in KFC

Recommendation There are several recommendations which can be taken into the account for KFCs betterment as follows: (1) KFC has to integrate their total quality management program to be more systematic, holistic and customer centric. (2) The second recommendation about KFC quality management is that the provision of fresh broiler chicken with high quality from certified poultries who have high standardization of quality in term of halal point, cleanliness as well as other quality determinants.

Limitation The limitation of this academic project or working paper is that the data is gathered through secondary method which is by analyzing the press release and provided information in the KFCs website. Moreover, the accuracy of data will be more valid and accurate if we conduct company visit or structured or semi structured interview with then quality manager of KFC.

CBEB2103 Operations Management Final Project

II.

INTRODUCTION: FUNDAMENTALS OF QUALITY IN KFC KFC is the biggest fast-food chain specialized in chicken as the basic raw materials to

be processes in the various ways of servings. KFC was discovered by Colonel Harland Sanders as the father of KFC who established KFC in Louisvielle, Kentucky, United States, 1930. Initially, KFC was become very populous during that time because of the distinguished taste and recipes used in cooking the chicken of KFC. Colonel Harland Sanders reached his popularity as celebrities in 1952 when he decided to make franchising marketing strategy around United States during that time. By the early of 1960s, he started to open up the franchising branches all around the world to be available for the globalized society. Nowadays, KFC has more than 17,000 outlets around the world. The most populous thing from KFC is its ingredient and recipes which were created by Colonel Harland Sanders. Most of the people named it the secret eleven herbs and spices to make KFC become different and unique from other fast-food products. The other famous and well known products which are offered by KFC such as twister chickens, hamburgers, salads, juices, carbonated soft drinks, french fries, beverages and other fast-foods products leverages.

Source: KFC Malaysia Official Website. (www.kfc.com.my) The first KFC restaurant in Malaysia was established in 1st January in 1973. Nowadays, there are approximately more than 500 KFCs outlets have been established in Malaysia. In addition, the KFCs Malaysia is become more distinctive toward their continuous development in term of product innovations which comply with local taste, such as KFCs Malaysian nugget, KFCs Nasi Dagang and Nasi Minyak as well as other local products. Furthermore, as known that Malaysia is Islamic State based country which all of the foods and goods must comply with Islamic Shariah Law. Malaysia is strictly toward the quality management and Halal policy presence in KFCs Malaysia. Herewith, there are some strategies which the KFCs local quality managers have done in order to assure their food quality and product quality control as well as their Halal guaranteed products and services.

CBEB2103 Operations Management Final Project

III.

DIMENSION OF QUALITY MANAGEMENT IN KFC As known that quality management has played prominent role in the operation

management. Dimension of quality management in KFC World as well as KFC Malaysia plays essential and prominent role to assure the quality of KFC to be ratified and endorses as qualified as possible by the customers as well as their accreditors. There are eight main dimensions of quality management in KFC which will be conveyed as follows: The grading of materials and resources in KFC is complying with performance dimension as well as friendliness & courtersy of the sales personnel,officers, & waiters The aesthetic dimension consist how the layout facility, outlets cleanliness, interior design as well as the food packaging in KFC The reliability includes the ability of KFC's machine to be reliable into certain periods (infrequency of breakdown) and the food services are well done by right people This is the most essential dimension for KFC's customer since this is tangibly measure the how well KFC's products & services conform with customer delight and expectations

PERFORMANCE DIMENSION

AESTHETIC DIMENSION

RELIABILITY DIMENSION

CONFORMANCE DIMENSION

DURABILITY DIMENSION

KFC's Durability for their processing machine (frying machine,utensils, frozen materials) are very important to be kept, since it determines their quality of maintsining their capitals.
As known that KFC is ratified by ISO 9000 because their sustainable qualified quality of product and services which they provide. KFC's is considered as fast handler of customer problem about the service as well as product complaints. (Such as a case happen edin KFC Penang 2012 about customer missunderstanding)

PERCEIVED QUALITY DIMENSION

SERVICEABILITY DIMENSION

SPECIAL FEATURES DIMENSION

The special features are mostly about KFC's additional product and services which are offered by KFC in fixed or seasonal period

Source: Graphic Created by Iman Shidiq with courtesy of Microsoft Office and Operation Management Book Chapter 9 of Quality Management (Stevenson)

CBEB2103 Operations Management Final Project

IV.

DETERMINANTS OF SERVICE QUALITY ANALYSIS in KFC Instead of focusing in term of product quality measurement, KFC Service quality

analysis also plays important role as the part of specialized quality management in KFC. There are five main factors of service quality analysis which are analysed in KFCs Malaysia quality management as follows: 1. Convenience Criteria KFC Malaysia has become very populous and well known since 1980s. The outlets are mostly located in the strategic area where the customers can reach those outlets as well as possible. The KFCs outlets in Malaysia have reached the total number of approximately more than 500 outlets. The quality and outlets management have to collaborate contributively to achieve the global objective of KFC to be the first fast-food chain with ratified quality management and quality assurance in the world (Harland Sanders, 1968) 2. Responsiveness Criteria The responsiveness of customer service is also considered as the essential and prominent point to succeed the incremental growth of service quality in KFC. As known that KFC World and KFC Malaysia customer service officers are trained to be responsive by the demand and order from the prospective customer. The KFC Malaysia applies the strategy of responsive and chained fast service to serve their customers. Moreover, we have understood that almost KFCs outlets in Malaysia are always crowded with the people who want to satisfy their wants of eating KFC products. The KFC service quality managers have to assure that the customers are not waiting too long to get what they want in KFC. 3. Assurance Criteria The assurance criteria is also considered as essential determinants which customer take into the account. Assurance criteria measures how knowledgeable the customer service to take care of the customer needs as well as their problems. 4. Courtesy Criteria KFC Malaysia envisages so well about the courtesy, ethics and politeness of their service personnel and officers to assure that their quality service is the best. 5. Tangibility Criteria The tangibility of quality management is also prominent point which KFC has to consider. The tangibility of quality can be measured through the cleanliness of outlets, the neatness of officers and service personnel and the time service order which they can give to their customers as well as possible. 5

CBEB2103 Operations Management Final Project

V.

RESPONSIBILITIES OF QUALITY MANAGEMENT IN KFC

Business Description KFC outlets prepare and sell chicken, snack and other approved menu items using the certain trademarks and trade secrets owned by KFC Corporation. The franchisor is KFC Corporation whose parent is YUM! Brand Incorporation. Quality System Management. The licensee will operate a KFC Malaysia and Global outlets, which are characterized by a unique system which includes special recipes and menu items, distinctive design, also have unique decoration and furnishing. KFC has specifications and procedures for operations procedures as well as for quality control like training and assistance, advertising and promotional program. Training and Assistance The franchisee, manager and the other employees indicated by KFC must attend and complete to KFC's satisfaction the initial training program offered by KFC on the operation of a KFC outlet. So, employees of KFC must attend and complete the training program to KFC's satisfaction. In certain training, there may include written material and classroom instruction. Franchising Strategy and Regional Procurement The franchisee will have a protected territory of the smaller of a radius of one and half miles of the KFC outlet. There may be an area around the KFC outlet containing three hundred thousand people. The franchisee's rights with respect to the protected territory will not be dependent upon achievement of a certain sales volume, market penetration or other performance factors. Within the protected territory, KFC will not use or permit others to use in selling food products. Franchisee has the right to use under the franchise agreement except for special event sales and foods products except other chicken than chicken in whole pieces that using the name or image of Colonel Standards. The outlet may only be relocated with KFC's advanced written approval. As known that the term of agreement and renewals also considered as important point of KFCs quality responsibility to assure the operational validity of KFC in certain period of time with legal compliance of the based or hosting country. The term of the franchisee agreement is twenty years. Renewal terms are dependent on the franchise agreement signed. Obligations and Restrictions

CBEB2103 Operations Management Final Project

During the term of the franchise agreement the franchisee or a fully-trained and qualified manager must devote full time to the management and operation of the KFC outlet. The franchisee is responsible for the full performance of the franchise agreement. But, if the franchisee is a corporation, one or more of the shareholders may be required to individually guarantee the performance of the obligations under the franchise agreement. The franchisee must sell all required products as KFC periodically designates. The franchisee may not deliver any product from the KFC outlet or anywhere else unless separately approved for delivery and have signed a Delivery Amendment. The franchisee may not including delivery and make sales at special events only the franchisee complies with KFC procedures.

VI.

RELATED COSTS OF QUALITY IN KFC

There are several related cost of quality which must be born and burdened by KFC in order to assure their quality management to well-arranged and well-organized. As known that the related cost of quality management also will be transferred and generated to be the tangible and intangible revenue stream of KFCs. Furthermore, those related costs of quality management will be known as below and elaborated through the smart art diagrams as well. 1. Prevention Cost 2. Appraisal Cost 3. Internal Failure Cost 4. External Failure Cost
Total Quality Planning of KFC Process Control and Inventory Planning Cost of Labor Inspection (Sudden or Structured) KFC's Reworking Cost Customer Assessment & Quality Improvement Testing and acceptance for purchased materials

PREVENTION COSTS

APPRAISAL COSTS

KFC's Quality Audit Cost

INTERNAL FAILURE COSTS

KFC's material procurement cost

KFC's Scrap Products Cost

EXTERNAL FAILURE COSTS

Complaints out and in of warranty

Product liability and service cost

Product recall and default cost

Source: Graphic Created by Iman Shidiq (www.firmansyahsw.com) with courtesy of Microsoft Office and Operation Management Book Chapter 9 of Quality Management (Stevenson)

CBEB2103 Operations Management Final Project

VII.

QUALITY ASSURANCE & CONTROL IN KFC Quality control is a process through which a business seeks to ensure that product

quality is maintained or improved and manufacturing errors are reduced or eliminated. Quality control requires the business to create an environment in which both management and employees strive for perfection. This is done by training personnel, creating benchmarks for product quality, and testing products to check for statistically significant variations. KFC Quality control is started from the chain of supply of all the raw materials whether the raw materials can be taken from local manufactured resources and imported manufactured resources. There are several prominent and essential programs of quality control and quality assurance which are conducted by KFC to assure their quality to be the top quality of first fast-food chained in global scale especially in Malaysia. Several major prominent of quality assurance in KFC World and Malaysia are explained and elaborated as follows:

PRODUCT QUALITY ANALYSIS - Nutritional Quality - Cleanliness Quality - Raw Materials Quality - Utensils used Quality - Compliance with Halal Foundation

SUPPLIER QUALITY - Inhouse inspections and control - Raw Materials from Ayamas Quality - Compliance with JAKIM - Veterniarian Health Logo - ISO 9001 Certification

RESTAURANT QUALITY -CHAMPS Concept of Resto Quality - Cleanliness of Sanitation and Facility - Friendliness in Service Management - Personal Hygyene and Equipment - Maintainance and Convenience

FOOD SAFETY CONTROL - KFC HACCP PRogram - Food Hazard Prevention - Physical, Biological and Chemical Aspect Controlling - Critical Control Point Analysis - KFC Daily operation checklist

Source: Graphic Created with courtesy of Microsoft Office and Operation Management Book Chapter Quality Assurance (Pearson,2012)and KFC Malaysia Official Site (www.kfc.com.my)

CBEB2103 Operations Management Final Project

Food Safety and Products Quality Analysis KFC took their products well above the minimum temperature recommended by WHO. KFC has developed standards procedure that would minimize risk of cross contamination between raw and products that ready to eat. KFC provide information on the nutritional values of KFC products to assist customers on planning a wholesome and balanced meal. For trying all of their products, they use non-hydrogenated palm oil that contains insignificant amount of trans fat and it is 100% cholesterol free. KFC also have a team of food technologist constantly experimenting with new flavors and creative concepts to provide more value, choices and healthy options for our customers. Apart from introducing international products into our market, KFC also have developed some popular local flavors designed to enables customers to enjoy an exciting dining experience. Supplier Quality Suppliers' performances are constantly monitored through regular submission of quality reports. In addition, KFC food technologists also conduct quarterly question and answer evaluations on their in-house suppliers. KFC use top quality raw materials from reputable suppliers like Ayamas Region Food. Ayamas is monitored closely by Department of Veterinary Service and has obtained the VHM (Veterinary Health Mark) Logo. It is also an ISO 9001 certificated company. All Ayamas chickens are slaughtered by personal certified by Jabatan Agama Islam Selangor to ensure Halal procedures are met. Restaurant Quality. The main attributes for KFC restaurant excellence are CHAMPS. C for cleanliness, H for hospitality, A for accuracy, M for maintenance, P for product quality and S for speed of service. CHAMPS Recognition Specialist conduct regular evaluations in every KFC restaurants throughout the country. The evaluation covers all aspects of CHAMPS including the cleanliness and sanitation of the premises and equipment, personal hygiene, hospitality as well as the friendliness in service, accuracy in the serving order, good maintenance, product quality standards and speed of service. Food Safety Quality in KFC HACCP Programme KFC established a Hazard Analysis Critical Control Point Programme for assurance of food safety. The process includes identifying, evaluating and controlling hazards physical, biological and chemical to ensure food safety. It is applied from receiving of raw materials until serving to our customers. For instance, KFC KLCC has been audited the certified by a reputable certification body since 2005. All the established Critical Control Point (CCPs) are now includes in KFC Daily Operations Checklist which is used by all the KFC restaurants in the country. 9

CBEB2103 Operations Management Final Project

VIII. HALAL FOOD POLICY AND COMPLIANCE IN KFC A. Halal Food Fundamentals in KFC Halal Food is food which is essentially and tangibly complies with the Islamic Shariah Law. Halal means that the food which will be eaten and consumed are fulfilling this main characteristics and requirement as follows: (1) Hygienic (2) Clean (3) Not Dangerous and Harmful for Health and Body (4) Free from the prohibited parts of animal body parts such as fang, and other stated in Shariah (5) Free from anything which are considered as filth (najis) under Islamic Law.

Source: Halal Food Certification by Jabatan Kemajuan Islam Malaysia As known that the main cornerstone of Halal Food in KFC is that the chickens or chick raw materials which are sent by the certified poultry or farming must comply and perform the Islamic Law. It means that the farming centres have to slaughter and manage those raw materials based on the Islamic law. They can not mix their foods with the pig and other forbidden animal as well as animal parts in managing the raw materials to be finished products which will be consumed by the consumers, especially is Islamic country such as in Malaysia, Indonesia and other Islamic countries in Arab Peninsular. B. Halal Compliance Control in Local Manufactured Materials and Products As we know that all of the food and material products which are manufactured and sold in Malaysia are Halal as well as controlled by the Department of Islamic Development Malaysia (JAKIM). JAKIM Malaysia issues one council which regulates about the halal products and foods presence in Malaysia. The council is called QSR Brands Shariah Advisory council which strictly and stringently monitors the overall flow and chain of halal food and product manufacturing processes to assure and ensure the Halal compliance with JAKIMs Halal Certification Regulation. There are two divisions of manufactured products which are regulated by Malaysia as well as regulated in KFC. Even, we known that KFC is considered as multinational franchising company which is coming from United States as non Islamic based country. The two division 10

CBEB2103 Operations Management Final Project

are known as regulation of such follows: (1) Locally Manufactured Products and Imported Products. In this section, we would like to explain and elaborate more about the quality controls and assurance toward the locally manufactured products with Halal Compliance based on Shariah or Islamic Law. Furthermore, there are two way of controls that assure the Halal compliance of locally manufactured products by conducting Internal Control and External Certification. Firstly, the internal controls must ascertain that all of KFCs products in Malaysia must conform to Halal requirements, apart from obtaining Halal Food Certification for KFCs internal operations. Moreover, quality manager of must operate internal controls of the raw materials procurement, manufacturing, packaging, storage, transportation and utensils. In Malaysia, KFC is known as careful company who is careful to prevent cross contamination of foods and utensils with the filth (najis) or dangerous as well as prohibited contaminants. The internal controls also adhere to adhere to industry best practices to maintain the highest standards of quality and hygiene in food production. The second way is called as External Certification by JAKIM Malaysia to inspect KFCs factory, restaurants, ingredients and processes before permitting KFC to use Halal JAKIM logo. The Halal Certification Process - Locally-Manufactured Products by JAKIM
QSR Brands develop product using only halal ingredients by Syariah Advisory

QSR Brands applies to JAKIM for halal assurance certification

Jakim Inspects the KFC's products, facilities and layouts

Jakim issues the Halal Certificate and Halal logo allowed for KFC's

Source: JAKIM Official Site and KFCs Official Site C. Halal Compliance Control in KFCs Manufactured Imported Products Furthermore, all imported products are certified Halal by the source country local Islamic food and nutrition certification body recognised by JAKIM. To further verify the Halal status of KFC imported products, officials from QSR Brands Shariah Advisory Council, inspect the facilities of all KFCs suppliers abroad.
Received request to use products/ingredients which has been certified by Halal compliance body from the source country (ex: Australia Halal Councils) QSR Brand Shariah Council verifies products and validates status of halal certifying body from source country with Jakim

Shariah advisory council gives and grants permission to use proposed product or ingredients.

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CBEB2103 Operations Management Final Project

IX.

CHALLENGES AND RECOMMENDATION FOR KFCS QUALITY KFC standards are expected to be same at every outlet all over the world. However,

KFC, as a franchiser is faced with various different circumstances in each country. By observing and analysing KFCs in Malaysia we highlighted a few points that must be serious concern for the management of FC to fall below their own standards. CLEANLINESS QUALITY CUSTOMER SERVICE ASPECT FOOD QUALITY AND HYGIENE DELIVERY AND LOGISTICS PEST CONTROL MANAGEMENT
Source: Graphic Created by Iman Shidiq (www.firmansyahsw.com) with the main source of Industrial Management of KFC (KFC Official Website)

Cleanliness: Most KFC outlets have fallen way below the standards when it comes to cleanliness and is characterized by distinct distasteful smell rather than the aroma of freshly friend chicken. This phenomenon is due to reasons pointed below: Garbage of the entire outlet is thrown either right outside or very near the entrance therefore causing repulsion in customers entering the arena. KFC sees a high rate of customers every hour, with more guests coming in for breakfast, lunch or dinner more will be the need to maintain the floors and the bathrooms due to increased frequency of guests.

Source: KFC by Jody Jamsden (www.coroflot.com) Most outlets cannot keep up with the equal rate of restaurant cleanliness when the number of increase. Cloths used to clean the tables are greasy and unkempt with no glass 12

CBEB2103 Operations Management Final Project

cleaner or appropriate substitute used to lighten the stench. Use of the same material over and over makes the tables oily and installs a sense of apprehensiveness in the guest. Service Aspect: Statistics have shown that every order takes 5 minutes to register and another 15 minutes before its carried on to the consumer while the competitors take 4.5 minutes to take the order to the customer. Staff faces much problem in understanding and providing a basic order within the time limit of what is considered appropriate. Also, many guests have complained regarding the impolite and inhospitable manner of the staff and the time taken to serve the guest when the order is not as asked or gets late. The staff is known to show a helpless attitude towards the regular guest problems. With the lack of passion for serving KFC management has a lot to work upon which must be enforced on following. Manager does not take appropriate measure to win over the customer in case a customer issue arises.

Source: Official KFC Malaysia Site (www.kfc.com.my) Food Quality: As per the Quality assurance guide on the KFC page, KFC has been ethically aware and health conscious when it comes to setting its food menu in Malaysia. They have arranged a balanced regime offering salads and rice with snack plates and 100plus kinds of drinks rather than high carbonated soft drinks. However, with increased awareness regarding healthy food with least preservatives KFC often gets a demand for vegetarian or more health conscious products. There is an increasing demand for more purified oil and addition of more healthy variety to choose from. Delivery: With the tropical weather in the region and high traffic jams during peak hours KFC delivery struggles to keep up with the hindrances and deliver not just the product in time but high standards and goodwill with it. Pests: With all standards satisfactorily maintained within the outlet and every measure taken to terminate pests there still have been a few cases reported regarding cockroaches. This is due to the external area around the outlet which however, affects KFCs reputation. 13

CBEB2103 Operations Management Final Project

X.

CONCLUSION KFC is a profitable and a successful venture in Malaysia. It has been accepted and

appreciated all over Malaysia due to which there are over 500 flourishing branches each doing commendable business. Basic of the responsibilities of an organization is to make ensure that all their actions and business operations adhere to the ethical standards provided by the law. Other than strategies for marketing and management, businesses have considered other elements that play significant roles towards success. Any business requires social interaction and dealings, the strong recognition of what is morally right or wrong is then essential. The ultimate purpose of this analysis is to ascertain the quality aspect of the operations within KFC. Any organization that considers ethical management as a major aspect of conducting business can easily gain respect and good reputation from the customers. Contrary to the belief that social responsibility undermines businesses' profitability goal, this actually help in generating profit through customer loyalty and good company image. For Kentucky Fried Chicken, the company must be able to ensure that the products that they offer are healthy and nutritional, so as to ensure also that their gain customer trust, loyalty and respect. KFC must also give importance to the management issues to build a healthy atmosphere for their employees to work in ensuring best quality and excellent service. Since todays generation is prone to hypertension induced by cholesterol it must prioritize in including healthy options in its menu by adding more fresh products like fruits and vegetables. They must also cater to the vegetarian market which is a huge and neglected niche. Lastly, being a retail outlet in a fast progressing and technology affluent circumstances KFC must consider investing in such technology which not only enhances consumer satisfaction but sells a memorable experience. The idea should be to make things hyper convenient and meaningful in order to nurture a satisfactory and enhancing customer relationship. KFC must aim at providing not just the product but an entire experience which will be share via social media encouraging one of the guests friends to walk down the same path in turn the KFC obtaining more consumers due to better basics such a quality, cleanliness and online security, hyper convenience such as ease-of-shop, home delivery, online payments and experience such as edutainment and digital engagement.

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CBEB2103 Operations Management Final Project

REFERENCES:

Stevenson, W.J. Operations Management: An Asian Perspective, 2012. Jacobs, Chase, Aquilano.2012. Operations and Supply Management by McGrawHill, 2011 Suri, Rajan (1998a), Quick Response Manufacturing. A Companywide Approach to Reducing Lead Times, Productivity Press. McGraw-Hill, 9th Edition 2010. Doherty, Jacqueline (12 May 2008). Allen, S. (1986). The Experience of consumer behavior in digital marketing. Macmillan in association with British Marketing Sociological Association. Baharin, N., Y. Ishak & R. I. (2012). Factors Influencing Operation Management Application in Malaysia and ASEAN. Paper presented at the Prosiding Perkembangan Pengurusan dan Ekonomi Kebangsaan Malaysia ke VII, Kuala Lumpur. KFC Malaysia Official Site. www.kfc.com.my KFC World Official Site www.kfc.com
http://en.wikipedia.org/wiki/Quality_costs

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