Termpaper-Global Maketing KFC - Tài liệu tham khảo Tiếng anh (TA8 ISW) | Đại học Hoa Sen

Marketing strategy of KFC in China:
Term paper by Solomon and Joyce Background
Kentucky Fried Chicken a fast food chain in the world started its first operation as
early as 1930, by Kernel Sanders as a small franchise based in Southern USA.
Colonel Sanders has become a very popular personality in all of KFC restaurants
the world at large. KFC lays its business philosophy in Quality, Service and
Cleanliness (QSC) which also serves as astounding critical success factors of its
global success. KFC grew mainly through selling of franchises to interested
business persons locally and internationally. The company had corporate parents
in the likes of Heublein to R J Reynolds. Under Heublein the company failed to
meets expansion plans of its competitors like MacDonald’s and needed an
effective turnaround strategy. The QSC motto got emphasized on a global level
together with the slogans such as “we do chicken better”.
Unlike predecessor Heublein, Reynolds was more willing to fund KFC’s global
expansion and did a thorough research and development. Expansion was possible
even in previously complicated markets. KFC success in China
KFC has since become a popular international brand in urban China since it first
opened its doors in the country as early as 1987. Its first western style quick serve
restaurant started penetrating the markets of China through its capital city
BEIJING. As the current largest fried chicken company in the world, KFC is no
doubt a global company which got attracted to the promising China market and 1
succeeded in its localization strategies. KFC is globally known for its popular and
persistent tenets of ‘quality, service and cleanliness’ which has by and large
responsible for its rapid growth, in the China market its prominent success its
owned to its keen perception of cross cultural marketing and understanding of the
Chinese culture. Also important to the success of KFC in China was its franchise
policy and scientific managerial operations known as CHAMP, that were
instrumental in measuring operational basics that included; Cleanliness,
Hospitality, Accuracy, Maintenance, product Quality and Speed. All this has
captured more that 450million urban Chinese people and this led to the opening
of at least 3,900 restaurants in China. As of now Chinese business has accounted
for at least $157 million in KFC’s operating profit which is a very good and promising signal.
Analysis of Porter’s five force model Entry
Economic reform in China that started as early as 1978, allowed China to develop
and modernize its economy. As a subsequence China slowly changed to a socialist
economy where government control on the economy was lessened and some
aspects of market economy was allowed and this allowed foreign investment. This
deliberate intension by China to concur to the wave of globalization made it
borders liberated for transnational companies to get attracted to do business with
China. Although this became a necessary environment that attracted KFC to enter
the Chinese market, KFC had to enter the Chinese market strategically through a
joint venture with a local company. The 3900 KFC restaurant are operated and 2
owned by Yum Brands. In this instance KFC was the majority shareholder with 52%
ownership and the local strategic partner owned the rest of the share.
Buyer/ supplier bargaining power
KFC was very strategic in entering the Chinese market in that it partnered with a
local Chinese company that introduced it to the China market. Basically the major
advantage was that market penetration was through backward integration which
meant that KFC chose a large local company that was involved in poultry business.
As a result this company supplied KFC restaurants with quality chicken and this
was of course with the standards and expertise of KFC. Bargaining power of
suppliers in this instance was very minimal since KFC had control over chicken
supply through its local partner who owned the poultry farms. It was also easy for
most government and other bureaucratic lines to be cut since poultry farming was
one of the prime industries that the Chinese government wanted to develop.
The Chinese government also did not view KFC like other multinational companies
or franchise businesses that were viewed as exploiting and taking advantage of
the locals. Buyers at the same times were mostly the urban population who were
very much willing to adapt to modernization and would welcome KFC taste more
so that the menu included part of their cultural food stuff. This then made
bargaining power of buyers to have a medium pressure, this being so because KFC
has to continually seek to localize its menus and satisfy customers at the same
time not compromising its standards. 3
Substitutes and complements
One other major international competitor in China was Macdonald, although its
meals were cheaper than KFC’s it failed to localize its menu and became less
appealing to the Chinese market. KFC got a competitive edge in that it localized
most of its meals just from the breakfast menus and also offered a lot of
promotion or gave a lot coupons to the delight of its customers. The Chinese really
liked the KFC recipe as a result substitutes and complements presented a low pressure on KFC. Rivalry
Industry competition can never be rules out but KFC has a unique recipe that was
not in direct competition with other players of the market. The Chinese market
does not have another prominent international chicken franchise that could pose
a serious threat to China, however this cannot be ruled out in the future. Competitive Analysis
Customer identification and customer base
China has a huge market base where at least 450 million constitute the urban
population that is regarded to be having a better buying power. So as part of
penetration strategy KFC identified urban population as modern or civilized
people that would easily accept western food. Beijing was choice as the first City
where the first KFC restaurant was opened since it has many universities and
research centered that acted as major source of influence in terms of
modernization caused by globalization. 4 Product range
KFC’s way of making money in China was a mixture of it finest recipe and China’s
classics. This means that over and above the standard menu KFC provides it menu
in China has been localizes to include; chicken with Sichuan spicy sauce and rice,
egg soup, a dragon twister, ‘KFC’s take on a traditional Beijing duck wrap’, all
washed down with some soybean milk. Marketing strategy Branding
In recognition of the distinct nature of transitional markets (Arnold and Quelch
1998), various companies have sought other ways to compete with domestic
offerings by, ‘clothing their brands in local costumes’, (Belk 2000). As purported by
Zhou and Hui 2003, localization of language, product attributes, advertising
content and even product meanings, is a common practice adopted by
multinational companies in most economies including China.
Perception of cultural differences and understanding of host culture are elements
critical in a firm’s international marketing strategy. As Zhang and Neelankavil, 1997
put it, “cultural values influence and are influenced by advertising. The grow-up
processes of consumers in a particular culture are indeed the procedures in which
they get accustomed to that culture’s values, beliefs, perceptions and norms. This
means that the when choosing an advertising theme for a particular culture, in
this case Chinese culture, social values and cultural characteristics of the target
audience are factors that needs to be carefully considered lest the advert doesn’t
bring the desired results. In this case KFC had to localize its advertising by 5
appreciating and having a full comprehension of the Chinese way of life so that
adverts made are congruent with mother culture’s norms and values. Such an
advert is bound to purposefully reach its targeted audience and bring about desired results.
KFC endeavored to utilize Chinese cultural symbols in order to brand its presence
in the mind of Chinese customers. One of the things that KFC did was to trying to
absorb Chinese cultural elements into the arrangements and decorations of its
outlets all over China. In 2003 KFC spent over $900,000 in redecorating the
flagship outlet in Beijing with the Great Wall, shadowgraph, Chinese kites and
other traditional symbol. This was even better since the same store is the world
largest KF outlet that befits such kind of advertising attention. Television
commercials were also based on the Chinese cultural elements, and the
integrated KFC message would essentially captivate the target audience.
Appealing to the younger customer
Over and above the fact that the Chinese customers were initially more fascinated
with the eating experience of experience as regards the warm and friend
customer service, climate controlled and spotless clean restaurants, KFC
endeavored to satisfy all types of its customers. KFC met customer’s novelty by
introducing western style menus that were more appealing to the younger
customers who were more open to diversity. Mexican chicken warp and New
Orleans Barbeque Wings were part of the delicious meals designed for the younger customers. 6 Organization
KFC still has the advantage of operating in a large market where the threat of new
entrants is very low. In this regard it has intension to infiltrate the Chinese market
at a very fast pace and diffuse to more rural communities before the threat of
other similar fast food saturate the market or pose a serious threat. The strategy is
to go large in china and cross over to other Asian countries. It’s perceived that KFC
opens a restaurant in a new location every 18houys and last year alone Yum
Brands’ 3900 restaurants in China earned more revenue than all 19000 Yum!
Brands restaurants in the US including, KFC, Pizza Hut and Taco Bell. This means
that at the moment KFC is very visible and accessible to its customers in China.
Other international competitors like Subway and Macdonald are not really keen in
expanding since they still are yet to out-compete KFC with the brand loyalty it has
won over its customers. As a result these competitors are using other means of
competition by trying to offer customers more convenience like in the case of
McDonalds with its drive through services. Unfortunately for this strategy not all
the stores will have a drive through since land in China is highly scarce and limited.
This growth strategy that KFC has chosen to employ seem to work well since most
of the new locations that are opened even in more rural areas have readily
accepted the KFC product and this is owned to its localization strategy. Having
imbedded the Chinese culture in its operational strategy has so far yielded the
most positive results. Actually the lessons learn from the Hong Kong market also
did assist KFC to appreciate cultural dynamics of a geographic location before penetration.
KFC’s Testing strategies 7
Before entering the Chinese market it was very important for China to test waters
in other Asian countries with smaller population but viable markets. As a results
China expansion plans came forth in the early 1980’s after successful expansion in
the South East Asian (SEA) region including Japan. Tony Wang who is a Chinese
national but educated in the US and Taiwan, then living in Singapore and manager
for KFC’s South East Asia Region, was offered an autonomous responsibility to do
a further feasibility study and determine whether it would be viable for KFC to
expand into the world’s most populous nation and the largest market for
consumer goods-China. The results of the investigation and the feasibility study
supported the idea of KFC having to expand into China.
In the same light the economic climate could not let KFC to operate as a pure
franchise in China like it did with other Asian countries, it had to form a joint
venture with the local company; an endeavor the Chinese government favored
most in order to delete possibilities of exploitation by a transnational franchise. It
also imperative to note that KFC didn’t do too well in Hong Kong due to the
novelty that already existed in the culture of Hong Kong. For them KFC was just a
fast food restaurant like any other and they didn’t see why they particularly find it
more appealing. However moving to Singapore and Japan where fried chicken
and Hainanese rice were very popular, brought positive and fascinating outcome
that showed great acceptance of the KFC franchise.
Strategies for the future 8 Marketing
KFC had a previous taste of the SEA market; therefore, it has grounds of steering
much confidence in penetration of the China market. Many lessons were learnt
from the failures in Hong Kong and successes in both Japan and Singapore as a
result KFC was well positioned to hit the Chinese market without doubt. Localization Localization of food
China is known worldwide for its concern for healthy eating; as a result when KFC
first penetrated its market, many consumers were a little nostalgic in terms of
having to accept the product because they are traditionally concerned with the
nutrition and taste of fast foods. For the fact that the Chinese market was not big
in eating beef, and liked chicken more, it was easy for KFC to be appreciated. China
itself has a very profound interest in poultry farming, and the poultry industry is
one of the top priorities of China modernization plans and KFC gained a lot of
support from the government. Chicken was thereby a more popular meal than hamburgers in China.
Localization with respect of life style
The other interesting thing was that KFC understood the lifestyles of the Chinese
customers and designed its meals to satisfy all types of its customers. For example
the young customers who have been affected by modernization are more open to
taste western foods as a result menus like the Mexican Chicken Wraps and New
Orleans Barbeque Wings were accepted more easily. 9
The older generation who were more apt with their culture had the chance to be
offered Chinese style fast food like the Old Beijing Chicken Roll, a wrap modeled
after the way Peking duck is served, but with fried chicken inside and
accompanied with green onions and hoisin sauce, and Sichuan Spicy Chicken
which absorbs the spicy flavor of Sichuan dish. Breakfast was also a blend of the
East and west which meant that all types of customers were catered for.
Employing Value/ cost strategies
KFC has chosen to use the mass market strategy of infiltrating the Chinese market
as a result it is quite prudent for the company to continue to keep a cost
minimization strategy a little moderate since it had already found favor with the Chinese market.
Expanding geographically
Using a population of 1.3 billion people for its market in china, KFC realized that it
is at a very strategic location to spread through the rest of the countries in Asia.
They also felt that the fast growing economy of China would on its own be a
leverage to attract and influence other Asia countries to readily accept the KFC
franchise. It is without a doubt that globalization had a positive impact in the
economy of CHINA, liberalization of its borders and less government involvement
and control in the economy attracted transnational companies to invest in China.
It is without doubt that other Asia tigers or countries would follow suit and embrace the KFC franchise. Price discrimination 10